Finance Bill

NIGERIA FINANCE BILL 2019: The Major Implications and Changes

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The Major Implications and Changes


Olusipe Abiodun


As a means of introduction, Finance Bill is an act of a legislature to acquire funds for the public treasury. It can also be said to be fiscal legislation enacted by the parliament containing multiple provisions as to taxes, duties, exemptions and reliefs at least once per year and in particular setting out the principal tax rates for each fiscal year.

This Bill encompass the following strategic objectives: (a) Reorganizing domestic tax laws to be in line with global best practices (b) Presenting tax incentives for investments in infrastructure and capital markets (c) Supporting MSMEs (d) Raising revenues for government and (e) Upholding fiscal equity;

Meanwhile, it is a known fact that Nigeria finance bill is strongly based on various tax laws in Nigeria which consists of Company Income Tax Act (Cap C21), Value Added Tax Act (Cap VI), Customs and Excise Tariff, Personal Income Tax Act (Cap. P8), Capital Gains Tax Act (Cap. CI), Stamp Duties Act (Cap. S8), Petroleum Profit Tax Act (Cap P13), which are all embedded in the Laws of the Federation of Nigeria (LFN 2004). Finance bill aims at reviewing some of the aforementioned tax provisions in order to encourage some selected set of people while making sure that government revenues are been increased and taking cognizance look at various tax laws that tends to discourage tax payers.



  • In section 9, a new paragraph was inserted and it states that interest and dividends includes compensating payments received by a borrower from its approved agent or a lender in a regulated securities lending transaction provided that      the underlying transaction giving rise to the compensating payment is a receipt of interest by a lender on the       collateral it received from its approved agent or a borrower in a Regulated Securities Exchange Transaction.
  • Section 10 of CITA has a new section which oblige every company to have Tax identification number (TIN) which will be featured on every documents of the company that have anything to do with revenue authorities, for instance,       Federal Inland Revenue services, Ministries and all Government agencies. Also, it was directed that all Nigeria banks     and other financial services organization should require every person or companies that open an account or transact             any business with them to provide their TIN (Tax Identification Number) as a precondition for the continued operation            of their bank’s accounts. Previously, the incorporation number of a company to which the provisions of section 8    apply, served as the identification number of the company.
  • Section 13(2) was amended and emphasis were laid on companies having significant economic presence in Nigeria not minding if its physically present here or not. New paragraph ( c) was inserted and it states that a company will be referred to as Nigeria company, if it transmits, emits or receives signals, sounds messages, images or data of any             kind by cable, radio, electromagnetic systems or any other electronic or wireless apparatus to Nigeria in respect of  any activity including e-commerce, application store etc. to the extent that the company has significant economic  presence in Nigeria and profit can be attributable to such activity.
  • Still under Section 13 (2), a new paragraph (e ) was added and it states that if the trade or business comprises the  furnishing of technical, management, consultancy or professional services outside of Nigeria to a person resident in  Nigeria to the extent that the company has significant economic presence in Nigeria, this will also be referred to and   be treated as Nigeria company, therefore the profit of such a business/trade shall be deemed to be derived from   Finally, subsection 4 was inserted which says that the minister may be order, determine what constitutes the significant economic presence of a company other than a Nigerian company.
  • Section 16 CITA was amended by inserting a new subsection (6) after subsection 5 which buttressed the point that investment income for the purpose of taxation of a life insurance company refer to under this section means income  derived from investment of shareholder’s funds.
  • Further amendment in Section 16 is that, in subsection 7 this statement was added after the word “business” in line  6, “and in all cases, the period of carrying forward of a loss shall be limited to four years of assessment”. In relation to outstanding claims and outgoings, paragraph (b) was amended, the point is that “any amount not utilized  towards settlement of claims and outgoings shall be added to the total profits of the following year”, and this  amount must be equal to the total estimated amount of all outstanding claims and outgoings.
  • Also, in Section 16 (11) of Company Income Tax , a new subsection (12) was inserted and it states that tax payable by any insurance company for any year of assessment shall not be less than:- 0.5% of the gross premium for the non-   life insurance business  or 0.5% of gross income for life assurance business.
  • In Section 19, a new subsection (2) was inserted and it stated clearly that the provision of subsection 1 of same Section will not apply to:

(a)       dividends paid out of the retained earnings of a company, in as much that the dividends are  paid out of profits and has been subjected to tax under CITA, PPT or the CGT.

(b)       dividends paid out of profits that are exempted from Income tax by any provision  of  this Act, Income Tax relief, Petroleum profit tax (PPT) or the CGT or any other legislation.

(c)       any profits or income of a company referred to as franked investment income (FII) under this act. And finally,

(d)       Distributions made by a real estate investment company to its shareholders from rental income and dividend income received on behalf of those shareholder

  • Section 23 (1) of CITA was amended by deleting paragraph N and substituting paragraphs O and Q with a new paragraph which states that the profit of a small company in a relevant year of assessment will be recognized as been small company profit provided that: – For paragraph (O). (i) The company comply with the tax registration and tax return filing stipulations of this Act and be subject to the provisions in relations to time of filling, penalties for breach     of statutory duties and all other provisions of this Act entirely during the period in which its profits are below the tax paying threshold.

 Note: Tax paying threshold is equal to or less than #25,000,000 (ii) Those profits are dividends received from small companies in the manufacturing sector in the first five years of their operations.

For paragraph (Q) the profits of any Nigeria company in respect of goods exported from Nigeria; if the proceeds of such exports are used for the purchased of raw materials, plant equipment and spare parts.

Note: Analyzing the above stated amendment in Section 23 (1), any profit made by small companies which are not utilized in the manner given above will be taxed proportionately. Also, under this section (Section 23 (1C), it was stated that any company engaged in agricultural production shall be granted incentives in addition to other incentives in this Act. The additional incentive is that, an initial tax-free period of five years which may be subject to satisfactory performance of agricultural production and this can be renewed for an additional three years maximum and such company cannot be granted same type of incentive under any other Act in Nigeria.

You may also like to read The impact of Finance Act 2020 on Businesses in Nigeria.

  • Section 29 of CITA was amended by adding a new subsection 3 and 4 with a provision in relation to Commencement rule and Cessation rule.

In Commencement rule:-  (I) Initially, the first year of commencing a business, the assessable profits used to be the profits from the date of commencement to 31 December of that same year but now after the amendment, the first year assessable profits shall now be the profits from the date in which it commenced to carry on a trade or business in Nigeria to the end of its accounting period.

(II) Initially, for the second year, the assessable profits used to be the profits from the date of commencement to the next following twelve months but now after the amendment, the second year assessable profits shall be the profits from the first day after its first accounting period to the end of its second accounting period.

(III) Initially, the third year of assessment used to be based on preceding year basis but now after the amendment, the third year of assessment and for each subsequent year, the assessable profits shall be the profits from the day after the accounting period just ended.

In Cessation rule:- The new provision stated that “where a company permanently ceases to carry on a trade or business (or in the case of a company other than a Nigeria company, permanently ceases to carry on a trade or business in Nigeria) in an accounting period, its assessable profits therefrom shall be the amount of the profits from the beginning of the accounting period to the date of cessation and the tax therefore shall be payable within six months from the date of cessation.

  • Section 33 of CITA was amended in subsection (1) where it was stated that, the minimum tax to be levied and paid shall be 0.5% of gross turnover of the company, less Frank investment income and likewise in subsection (3), by  substituting for paragraph (b), and putting a new paragraph (b), which states that a company that earns gross turnover  of less than #25,000,000 in the relevant year of assessment. Note: This implies that any company that earn a gross turnover below #25,000,000 will not be taxed (i.e. tax  exemption) but must strictly abide by the condition to    enjoying such a privilege.
  • A new subsection (2) was inserted in Section 33 of CITA which states that “for the minimum tax to be levied and     paid shall be 0.5% of gross turnover of the company less franked investment income and also in subsection (3)    of the same section, a new paragraph (b) was inserted and it states that “a company that earn gross turnover of less  than N25,000,000 in the relevant year of assessment”.
  • Pioneer status under section 39 of CITA enjoyed by some companies will deprive them from been entitle to Gas Utilization Incentive under Section 39 of this act.
  • In Section 40 of CITA, a new section 40 was introduced, where it was stated that small company tax based on what  was stated in section 23 (1) of the finance bill act (This provision aims at boosting Small and Medium Scale  Enterprise (SMEs) and tends to improve the ease of doing business in Nigeria. Also, medium sized company, will be taxed at the rate of 20kobo for every naira and large company will be taxed at the rate of 30kobo for every naira.
  • Section 77 of CITA was amended by inserting a new subsection (5) stating that every company shall make payment of tax due on or before the due date of filing, in totality (lump sum) or in instalments. It was also stated that where a taxpayer pays in instalments, he must have first write with evidence of payment of the first instalments, and   obtain             the approval of the service to pay in such number of instalments as may be approved by the service, and the final instalments must be paid on or before the due date of filing.

Under this same act, subsection (5), new subsections (5A) and (5B) was inserted. In (5A), it was stated that “where a company pays its tax 90 days prior to the due date as provided under section 55 of the finance bill Act, the company is entitled to a bonus of 2% if the company is a medium sized company and 1% for any other company on the amount of tax paid, which shall be available as a credit against its future taxes.” Finally, under this section, the new subsection (5B) stated that “any balance of taxes unpaid as at the due date shall attract interest and penalties as provided in the Finance bill act or any other relevant law for failure to pay on the due date.

  • Definitions are made to some terms, few of this will be mention here, Approved agent, Bank, Banking, Borrower, Compensating payments, Financial institutions, financial services, Gross turnover, large company, medium-sized company (company that earns gross turnover greater than #25,000,000 but less than #100,000,000), small company  (company that earns #25,000,000 or less).
  • The schedules of CITA are altered by updating the table of tax exemption on interest on foreign loans as follows:-
Repayment period                            Grace period                                     Tax exemption
                                                            Including ‘Moratorium’                  allowed
Above 7 years                                   Not less than 2 years                       70%
5-7 years                                            Not less than18 months                   40%
2-4 years                                            Not less than 2 months                    10%
Below 2 years                                   Nil                                                       Nil


  • In Section 81 of Company income Tax Act amendment was made to reduce withholding tax rate to 2.5% for the following construction activities: Power plants, buildings, bridges and roads.


In Personal Income Tax Act, Sections 2 (2), 49(1), 86 (2) (a) and (8), 102 (1), and 108 (f) are amended. In the course of this analysis, the major amendment will be touched. 

  • In Section 20 (1) of PITA which talk about allowed deduction, a new paragraph (g) was inserted and it states that “a contribution to a pension, provided or other retirement benefits fund, society or scheme”. Previously, this is  been approved by the board but now emphasis is not laid on the board approving it.
  • Section 49 of PITA was amended by inserting a new subsection (1) and deleting the previous subsection (1) and the new subsection states that: A person engaged in banking shall require that a person intending to open a bank  account for the purpose of the person’s business operations shall provide a tax identification number as a precondition for opening or continue operating of such bank account.
  • Provident or similar funds contributed by employee are now exempted from tax.
  • In Paragraph 18 of the Third Schedule, the #100,000 threshold and 10-year minimum service period for gratuity exemption are now eliminated.
  • Also, there is an objection that stated that, Tax assessments may now be delivered by electronic means not necessarily by physical appearance in Tax office. Section 58 (1).


  • A new section was inserted for Section 2 of this act which states that “The tax shall be charged and payable on the supply of all goods and services in Nigeria other than those listed in the first schedule to this Act”. The act has now restructured the basic food items to be included as appropriate foods and their variances. Furthermore, new items has   been added to exemption “local manufactured pads and sanitary towels, mortgage institutions people’s banks and   microfinance banks services. Also, intangible properties has been added to the definition of ‘goods’. Intangible properties like license, copyright, patent etc in which a person derives income and has rights upon.
  • Section 4 of the Value Added Tax Act was amended in line 1 by replacing for the expression 5%, the expression, 7.5%, which implies that VAT will now be computed at the rate of 7.5% instead of 5% that is been used before.
  • Section 8 was replaced with another provision, which relate to registration and deregistration requirements of a trade or business. It states that, a taxable person shall upon commencement of business, register with the service for  the purpose of the tax and any taxable person who fails or refuses to register with the service within the time specified    time will be liable to pay a penalty amount of #50,000 for the   first month in which the failure occurs and #25,000 for  each subsequent month in which the failure continues. Finally, where a taxable person permanently ceases to  carry  on a trade or business in Nigeria, the taxable person shall notify the service of its plan to deregister for tax  purposes within 90 days of such cessation of the trade    or business.
  • A new Section 10 was inserted and it stated that (1) “a non-resident company that carries on business in Nigeria shall register for the tax with the service, using the address of the person with whom it has an existing contract, as  its address for the determination of tax correspondence (2) “the service will notice, determine and direct the  companies operating in the oil and gas sector which shall deduct VAT at source and remit it to the service. 
  • Section 14 of VAT Act was amended, where it was stated that “Non-resident companies (NRCs) to include VAT on their invoices to Nigerian clients/customers and Nigerian companies also must remit VAT on contrary charge not minding maybe foreign companies add VAT on their invoices or not.
  • Section 15 of the VAT Act was substituted with a new section 15, this section talked about threshold to be meets by a company before it can exempt tax and also that the company must render to the service on or before the 21st day of every month in which this threshold is achieved and on or before the same day in an output tax  collected by him in the preceding month in such a manner as the Service may prescribe. The threshold refers to here is #25,000,000 either singularly or  Also, in determining whether a person meets the threshold in subsection (1) (b) of this act, the value of the following taxable supplies shall be omitted:- (a) a taxable supply of a capital asset of the person and (b) a taxable supply made solely as a consequence of the person selling the whole or a part of its business or   permanently ceasing to carry on business..


The only part amended in this act is Part III, section 21 of the customs and excise tariff by substituting for subsection (1 with a new one that states that: (a) Goods imported and those manufactured in Nigeria and specified in the fifth schedule to this Act shall be charged with duties of excise at the rates specified under the duty column in the schedule except the goods are not locally produced in Nigeria and raw materials are not locally available in Nigeria. Probably, this new provision will make locally made goods to be more competitive


  • The Scope of Section 27 of CGTA has been enlarged by adding other disallowed expenses and they are: Taxes or penalties incurred on behalf of another person, Losses of a capital nature, Penalties given by any Act of the National  Assembly for defilement of any statue and Expense incurred so as to derive tax-except income.
  • In Section 32 of this Act, a new one was inserted, where it was stated that, where a trade or business carried on by a company is sold or transferred to a Nigeria company for the purpose of its management in Nigeria and the assets      utilized in such trade or business is sold or transferred, therefore, no tax shall apply under this act to the sale or  transfer of the assets to the extent that one company has control over the other or both are controlled by some other  Provided that, if the company acquiring the other company were to make to subsequent disposal of the   assets acquired within the succeeding 365 days after the date of transactions, any concession enjoyed under this   subsection shall be withdrawn and the company shall continue to be treated as a normal company.
  • In Section 36 (2) The compensation for loss of office below #10,000,000 is not tax exempt


  • In Section 60 of this act, Dividend paid from petroleum profits are now subject to withholding tax deduction at the rate of 10%. This single amendment tends to annul the provision of PPTA that remove dividends from petroleum operations  from withholding tax. This implies that, taxpayers would now be loaded with the responsibility of withholding tax when paying dividends.


  • #10,000 is now set as threshold for electronic transfers with a flat duty of #50.
  • The federal government agency confirmed as the legitimate collector of stamp duties is Federal Inland Revenue Section 4(1)


The Finance Bill strives to modify the argument on commencement and caseation rules in Company Income Tax. Initially, a period of up to 12 months evades tax on cessation of business but after this new amendment, justice has been done to that and it’s a good idea. Not forgetting to note that, companies now suffer tax twice on profits of not less than 12 months at the beginning of the business.

In the new Schedule seven (7) of CITA, interest expense on loan from foreign connected persons is now restricted to 30% of Earnings before interest, Tax, depreciation and Amortization (EBITDA) in a year.  Initially, pension contributions require the approval of the Joint Tax Board (JTB) but amendment are made to Personal Income Tax Act and there is no need for joint tax board to clarify pension contributions which will be tax deductible, this is now performed by the Federal Inland Revenue Service. Likewise, the new finance bill seeks to remove the tax exemption on the withdrawals from pension scheme.

In the new bill, banks are now required to demand for Tax Identification Number before opening bank accounts for individuals, business and corporate bodies for them to keep operating their account and existing account holders will have to provide their own TIN to continue operating their accounts too. The chosen formal channel of correspondence accepted by the tax authorities with taxpayers is now “Email”. It is also noted that, tax agents appointed for tax deduction that fails to deduct tax will be penalized with a 10% of the tax not deducted plus the interest at the prevailing monetary policy rate of the Central Bank of Nigeria.

Finance bill strive to introduce all-encompassing changes to the tax laws covering seven different tax laws. It is been expected that those changes will bring about positive impacts on investments and make it easy for taxpayers to pay tax, especially Small and Medium Scale Enterprises (MSMEs).

With the new amendment, I totally believed that tax laws will be regulated on a yearly basis so that the tax system of Nigeria will continue to develop in line with changes in business and economic conditions.  Also, the awkward tax rules surrounding cessation has now been eradicated and  in the case of VAT exemption on the sales of company by foreigners to Nigerians for trade or business purpose, it was amended that, the acquiring party will enjoy VAT tax exemption for a period of one year (365 days) but before they can fully enjoy that, the acquiring companies must send an approval request letter under CITA section 29 (9) to the FIRS and include a VAT exemption request. (This is in relation to Group reorganization).

Also, the new amendments also portray that companies without their TIN cannot operate corporate accounts in Nigeria and foreign companies that engage in the economy digitally would be subjected to the payment of tax in Nigeria. The new finance act is a welcome development in tax scene of Nigeria and it has the tendency of boosting the economy by inspiring the growth of small and medium scale enterprises and attracting foreign direct investment into our country, Nigeria.

Finally, this amendment will definitely make every company with physical or no physical presence in Nigeria to pay tax and we implore the government to make sure that the revenue made through taxation are accountable for and they are used in developing Nigeria economy for the taxpayers to have a reasonable sense of belonging that will let them have trust in the system and this trust will make them not to try to evade tax in any way.

About the Writer

Olusipe Abiodun Yinka is an Audit Associate in Bulls Capital Limited. He has a National Diploma in Accounting from Abraham Adesanya Polytechnic, Ijebu-Igbo, Ogun State; as well as a Degree in Accounting from Alex Ekwueme Federal University, Ebonyi State. He is a creative writer and a Trendsetter. Apart from writing, Olusipe is also an entertainer.

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