To increase revenue and curb misconducts in finance, a comprehensive measure of legislation has been passed. Nigeria’s Finance Act 2023, which significantly alters the country’s excises, duty, and tax system, became law on May 28. Former Nigerian president Muhammadu Buhari signed the Act into law right before his administration ended. A 10% capital gains tax is imposed on the sale of digital assets, such as cryptocurrencies, under new laws that the Nigerian legislature has issued under the Act. It is anticipated that additional clarity from the appropriate government bodies will emerge in the coming months.
Also, the act permits losses incurred on assets subject to capital gains taxes to be carried forward for a maximum of five years, which offers some relief to parties by enabling them to credit future gains against past losses on the same category of assets. Company budgetary priorities may change as a result of the new law, which eliminates the investment allowance on plant and equipment under the Companies Income Tax Act. Also, to help fund capital contributions subscriptions and other financial needs to international organisations like the African Union, the United Nations, and the African Development Bank, the country has implemented a fee of 0.5% on items brought in from outside Africa.
Tax will also be extended to the telecommunications industry.
With the goal of raising more funds for the government, the Act has also extended the application of excise tax to all services. When this tax expands to the telecommunications industry, however, consumers may be put off, and demand for service declines as a result of the potential increase in cost. Changes to transfer pricing rules will be applied to Value Added Tax (VAT) on transactions between the related parties that are considered artificial as part of the legislation’s overarching effort to get rid of corruption as well as avoid price manipulation and tax avoidance.
In an effort to improve the efficiency of tax collection on the part of the Federal Inland Revenue Service (FIRS), parties that are accountable for the withholding and collection of taxes by the agency are now also expected to remit the VAT to the agency no later than the 14th day of the following month. Furthermore, the Nigerian Customs Service is slated to assure effective VAT collection, meaning that non-resident suppliers engaged as agents of the FIRS would not have their taxable items subject to additional VAT prior to clearance.
Generated revenue will be utilised to strengthen the economy.
As a result of these changes, only permanent buildings are now liable to pay VAT, while temporary facilities like cars and TV antennas are now exempt in that category. By increasing the Tertiary Education Tax from 2.5% to 3% of assessable profits, Nigeria has also made new measures to finance its tertiary education capacities. This increase reflects the Finance Act 2021’s increase from 2% to 2.5%. The government’s goal is to use the increased revenue from the last year’s strengthening economy to expand public services and improve the quality of life for all citizens.
Additionally, the Act has tightened restrictions on the lucrative petroleum industry in Nigeria. Companies that do not comply with the Petroleum Profit Tax Act will be subject to greater charges for violations as a result of the legislation’s addition of new penalties for such acts. Any party that is found guilty of violating the Petroleum Profit Tax Act will be subject to a fine of $43,290 in addition to a potential prison sentence of six months if they are guilty under the new laws.
Agencies collaborate to oversee the new entity.
Moreover, the Finance Act will set up an executive board, management team, and governing council, all of which will collaborate with the minister of finance to supervise a new entity known as the Ministry of Finance Incorporation. This new entity is going to be responsible for amending and advancing regulations in accordance with the Ministry of Finance (Incorporated) Act, and the regulatory alterations will be implemented only after receiving clearance from the minister of finance.
Related Link
BOF: Website
Snopes.com
