Stakeholders Reject 20 Key Provisions Of The Nigeria Tax Reform

The Nigeria Tax Bill, titled “An Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks Relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions and Instruments, and for Related Matters,” is among three bills transmitted to the National Assembly by President Bola Tinubu on October 3, 2024.

Since its introduction, the proposed tax reform has sparked controversies and protests among various stakeholders, with some state governors and traditional rulers from northern Nigeria strongly opposing key provisions.

The bill aims to streamline Nigeria’s tax structure by repealing existing tax laws and consolidating them into a single legal framework.

However, critics argue that certain provisions could burden businesses and individuals, while others believe it could undermine state-level tax autonomy.

20 Key Provisions Of The Nigeria Tax Bill

The proposed legislation introduces several major changes to Nigeria’s taxation system. Below are 20 key provisions of the tax bill that have generated the most debate:

1. Increment in VAT: Value Added Tax (VAT) will increase from 7.5% to 10% by 2025, 12.5% from 2026 to 2029, and 15% from 2030 onwards.

2. VAT Exemptions: Essential items like food, education, and healthcare will be exempt from VAT.

3. Tax Relief for Low-Income Earners: Individuals earning ¦ 800,000 or less annually will be exempt from Personal Income Tax (PIT).

4. Progressive PIT System: A more progressive PIT system will be introduced, with reduced rates for low-income earners.

5. 5% Excise Tax on Lottery and Gaming Income Section 62 and Schedule 10 of the law propose 5 percent excise duty on revenue of lottery and gaming trade or business.

6. 5% Telecoms Tax: The bill proposes a five percent excise duty on telecommunications services, including post-paid and prepaid services regulated by the Nigerian Communications Commission (NCC).

7. Increased CIT Exemption Threshold: The threshold for Companies Income Tax (CIT) exemption will be raised from ¦ 25 million to ¦ 50 million in turnover.

8. Streamlined Tax Processes: The Nigeria Tax Administration Bill aims to create a centralized and user-friendly process for tax registration, filing, and dispute resolution.

9. Joint Revenue Board: A stronger Joint Revenue Board will be established to improve coordination between federal and state governments.

10. Tax Ombudsman: A Tax Ombudsman will be introduced to ensure fairness and protect Nigerians from unjust taxation.

11. Nigeria Revenue Service: The Federal Inland Revenue Service (FIRS) will be renamed to the Nigeria Revenue Service (NRS).

12. Revenue Sharing Formula: A new revenue sharing formula will allocate 10% to the federal government, 55% to states, and 35% to local governments.

13. Electronic Invoicing: Taxpayers will be required to use electronic invoicing systems to accurately record and report taxable supplies.

14. VAT Fiscalisation System: A VAT fiscalisation system will be introduced to streamline tax reporting and enhance compliance.

15. Penalty for Non-Compliance: Failure to comply with the VAT fiscalisation system will result in a penalty of ¦ 200,000, plus 100% of the tax due, and an annual interest rate of 2% above the Central Bank of Nigeria’s (CBN) Monetary Policy Rate (MPR).

16. Tax Relief for Entrepreneurs and Self-Employed Individuals: Tax reliefs will be extended to entrepreneurs and self-employed individuals with regard to PIT.

17. Reduction in Companies Income Tax Rate: The CIT rate will be reduced from 30% to 27.5% in 2025 and 25% in subsequent years.

18. Exemption from Withholding Tax: Small businesses will be exempt from withholding tax deductions on business income.

19. Capital Gains Tax Exemptions: Certain capital gains will be exempt from taxation, including proceeds from the sale of residential property or land adjoining the residential property up to a distance of 1 acre.

20. 4% Development Levy on Companies Section 59 stipulates a development levy on the accessible profits of companies, excluding small and non-resident companies. The levy will be four percent for 2025 and 2026, three percent from 2027 to 2029, and two percent from 2030 onwards.