On 21 November 2019, the Senate passed the Finance Bill 2019, which seeks an amendment of Nigeria’s tax laws and make them more responsive to the tax policies of the Federal Government, among other things. The President stated that the amendment and passage of the Finance Bill would enhance the implementation and effectiveness of government’s tax policies. According to Chairman of the Committee, Senator Olamilekan Adeola, the initiative to reform the tax system and the proposed modifications to the fiscal rules around taxation are clearly aimed at creating an enabling business environment aimed at minimizing the tax burden for micro, small and medium enterprises (MSMEs). The bill passed its second reading on 6 November 2019. Main proposed amendments are given below:
- A lower (i.e. 20%) corporate income tax rate (CIT) applies for companies with turnover between NGN25-million and NGN100-million. However, businesses with a turnover below NGN25-million are to be exempted from CIT rate;
- Additional dividend other than profits are exempted from tax and franked investment income only to un-taxed distributions;
- Minimum tax provisions are amending to 0.5% of turnover;
- granting a bonus of 2% of tax payable to medium-sized companies and 1% to large companies for the early payment of companies income tax;
- introducing thin-capitalization requirements of an interest deduction is equivalent to 30% of EBITDA for loans received from non-resident associated parties, with any additional interest expense allowed to be carried forward up to five years;
- subjecting a deemed tax presence for non-residents with respect to imported technical and management services to a final withholding tax rate of 10%; and
- introducing an annual VAT registration threshold of NGN25-million.
