Things to know about the Finance Act 2020

Posted in CategoryTax Discussion
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    Bunmi Mercy 1 week ago

    Here are a few things to note about The Finance Act of 2020:

    1.      If you are a low income earner on N30K per month or less, you are now exempted from personal income tax based on the new finance Act. So tell your employer to stop deducting PAYE from your pay effective from this month.

     

    2.      Reduction of import duty on Tractors from 35% to 5%; Mass transit vehicles for transport of more than 10 persons and Trucks from 35% to 10%, and reduction of import levy on Cars from 30% to 5%. You should pay less when importing or buying an imported car.

     

    3.      The new law clarifies that land & building are not taxable goods for VAT purposes. This means no VAT on transfer of land or purchase of a house. Impliedly, it also means no VAT on house rent on lease of real property whether residential or commercial.

     

    4.      Effective 1st Jan 2021, commercial flight tickets have been exempted from VAT. Next time you fly, cross check that you're not wrongly charged VAT (and hopefully air fares should come down)

     

    5.      FIRS may prescribe the form of accounts other than audited financial statements for small and medium companies as defined under CITA. This means eligible small and medium companies may no longer need to submit audited accounts.

     

    6.      With respect to cars, the #FinanceAct2020 only reduces import levy rather than import duty. Since import levy is not applicable on used cars then the reduction only affects new cars.

     

    7.      Minimum tax payable by companies in respect of returns for years of assessments falling due between 1st Jan 2020 and 31st Dec 2021 has been reduced from 0.5% to 0.25% of 'gross turnover less franked investment income'

     

    8.      For companies operating in the free trade zones, exemption from taxes is subject to compliance with tax filing and returns obligation to the FIRS under section 55(1) of CITA

     

    9.      Unclaimed dividends in a listed company and dormant account balances unutilised for 6yrs or more to be transferred to Unclaimed Funds Trust Fund to be managed by the DMO. Amounts can subsequently be claimed by the owner at any time together with the yield thereon.

     

    10. Service of notice of assessment and objections under CITA may be done via email or other electronic means as may be directed by FIRS in a notice. TAT may conduct its hearing virtually using such technology or application as may be necessary to ensure fair hearing.

     

     

    11. Compensation for loss of office up to N10m is exempted from tax. Any excess above N10m is liable to 10% CGT to be deducted by the payer and remitted within the time specified under the PAYE Regulations.

     

    12. Public character for the purpose of tax exemption requires an organisation or institution to be registered in accordance with relevant laws in Nigeria and must not distribute or share its profits in any manner to members or promoters.

     

    13. A small or medium company engaged in primary agricultural production may be granted pioneer status for an initial period of 4 years and an additional 2 years (making a total of 6 years).

     

    14. The scope of items liable to excise duties has been expanded to include telecommunication services provided in Nigeria as may be prescribed in the law or an Order issued by the President. You may have to pay more for airtime & data in the near future.

     

    15. It is prohibited for any agency to reduce contract values or engage in splitting of procurement to evade the use of the appropriate procurement method.

     

    16. Revenue collected from the new EMT levy will be shared based on derivation 15% to FG & FCT and 85% to States

     

    17. A non-resident person that makes a taxable supply to Nigeria is required to register for tax, include VAT on its invoice, and may appoint a representative in Nigeria for the purpose of its tax obligations. The FIRS may issue guidelines for this purpose

     

    18. Operating surplus of a corporation shall be paid to the CRF of the Federation on a quarterly basis. Finance Minister may effect a direct deduction from TSA or other accounts of a corporation to enforce compliance

     

    19. Accountant General for the Federation to open dedicated accounts for each tax type for the payment of tax refunds to be administered by the FIRS and funded based on annual budgets for tax refund for each tax-type as may be approved by the National Assembly.

     

    20. Cost of donation made in cash or kind to any fund set up by government in respect of any pandemic or natural disaster to be tax deductible subject to a maximum of 10% of 'assessable profits after other allowable donations'

     

    21. Gross income for personal relief purposes has been redefined as income from all sources excluding non-taxable income, exempt items & income on which no further tax is payable. This means lower tax relief for those who earn exempt income.

     

    In the case of an enterprise, gross income for purposes of claiming personal relief by the owner is 'income less all allowable business expenses & capital allowance'.

     

     Source: Taiwo Oyedele

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