Before the transition in government, former President Muhammadu Buhari had signed into law the Finance Act 2023 on May 28, 2023. Effective from September 1, 2023, per the Finance Act (Effective Date Variation) Order 2023 by President Bola Ahmed Tinubu, the Act introduces crucial amendments in several statutes. One of them is the Capital Gains Tax Act (CGTA). On digital assets, Section 3(a) of the Act now recognizes them as taxable property, subjecting its disposal to a capital gains tax rate of 10 percent. Through the amendment of Section 5, the Act now permits the offset of losses against gains from the disposal of similar assets when calculating chargeable gain amounts. Where losses surpass chargeable gains, they can be carried forward for up to five years for deduction from presumably future gains of the same asset class.
In the same vein, Section 31(6) of the CGTA is amended to grant roll-over reliefs on the disposition of shares and stock. However, proceeds from the disposal must be reinvested in purchasing shares of a Nigerian company within the same assessment year. Another amendment is the Companies Income Tax Act (CITA). According to this Act, Section 5 of the Finance Act 2023 adds subsection (a) to section 14(4) of CITA, requiring shipping and air transport firms to submit tax returns without separate financial statements for Nigerian operations. The Act in Section 6 also repeals Section 32 of CITA, which provides for the right of a company to enjoy a 10 percent allowance of the actual expenditure incurred on plants and equipment.
Customs, excise and personal income tax statutes.
Section 34 of CITA, which granted a rural investment allowance (15 to 100 percent) to companies enhancing rural areas with amenities such as electricity, water, or roads, has also been repealed by the Act. But a company can keep using this allowance until fully utilized if it incurred qualifying expenses before the Act’s effective date. Then, Section 8 of the Act expunges section 37 of CITA, which grants a tax exemption of 25 percent for income received in convertible currencies from tourists and reserved for hotels, conference centers, and tourism facility development within five years. Meanwhile, under the new section 13(4), a 0.5-percent levy is applied to eligible goods imported into Nigeria from outside Africa. This levy supports capital contributions, subscriptions, and financial commitments to organizations like the AU, AfDB, and others as may be designated by the minister of finance.
Again, the list of services subject to excise taxes has been broadened to include all services, including telecommunication services offered in Nigeria. The Act also specifies the duties of the minister of finance as the leader and overseer of the Tariff Review Board, responsible for reviewing customs and excise tariffs. On the Personal Income Tax Act (PITA), the new law allows for a deduction of any premium made by an individual to an insurance company for their life, their spouse, or for a deferred annuity based on the same.
Petroleum profits, stamp duties and VAT statutes.
Regarding the Petroleum Profits Tax Act (PITA), the new law permits money given to a scheme, fund, or arrangement approved for decommissioning and abandonment to be deducted from taxes when calculating adjusted profit. Section 17 of the finance law creates a new section 30 in PITA, which mandates every company not yet involved in bulk oil sales to submit audited accounts and returns. For newly incorporated companies, this should be done within 18 months of incorporation, and for existing businesses, within five months from the fiscal year-end. Non-compliance incurs ₦10,000,000 on the first default, followed by ₦2,000,000 per day thereafter, or a sum set by the finance minister.
On the Stamp Duties Act (SDA), Section 89A (4) of the SDA has been amended to make a provision for the sharing formula for Electronic Money Transfer levy as follows: 15 percent for the Federal Government and FCT, Abuja; 50 percent to state governments; and a 35-percent share to local governments. As for Value-Added Tax (VAT), Section 7 of the VAT Act now authorizes the Federal Inland Revenue Service (FIRS) to evaluate transactions to establish their authenticity and market value for taxation. This gives the FIRS authority to scrutinize contrived or fictitious dealings among related entities. Section 46 of the VAT Act was amended to provide a new definition of the term “building” to bring structures under the ambit of VAT.
Amendments concerning TETFund and public procurement.
There is an increase in TET rate in Section 1(2) of the TETFA was amended to set it from 2.5 percent to 3 percent. The tertiary education tax rate recently rose from 2 to 2.5 percent with the passage of the Finance Act in 2021. The new act amended Section 22 (4), increasing the fine to be imposed on public officers who sign contracts without budget provision, administrative approvals or procurement plans in the course of their official duties from ₦100,000 to ₦10 million. Finally, it modifies section 16(1)(b) of the Public Procurement Act (PPA), subjecting procurement actions to an approved plan, adherence to bureau regulations thresholds, and the finance minister’s guidelines. These amendments are a testament to the government’s concerted efforts to strengthen the Nigerian Taxation ecosystem.
Related Link
Budget Office of the Federation: Website
