On Monday 13 January 2020, President Muhammadu Buhari signed the Finance Bill 2019 into law. Quite significantly, the new Act is aimed at curing the deficiencies of major tax legislations through the amendment of obsolete and contentious provisions and the introduction of sweeping reforms to the Companies Income Tax Act (CITA), 2004; Value Added Tax Act, 2007; Capital Gains Tax Act, 2007; amongst others.


  1. Increase in Value Added Tax Rate to 7.5%: The Value Added Tax (VAT) rate has now been revised upward from 5% to 7.5%.
  2. Digital Taxation for Non-Resident Companies (NRCs): The Act provides for the taxation of NRCs carrying on activities such as consultancy, technical, management or professional services in Nigeria on digital platforms; provided that they have "significant economic presence" (SEP) in Nigeria, and their profit can be linked to such activities. It also empowers the Minister of Finance to determine what will amount to Significant Economic Presence. While the Minister of Finance is yet to make such determination, the intention of the draftsman is to expand the scope of taxable businesses in Nigeria to include e-commerce activities.
  3. Requirement for Tax Identification Number (TIN) and Use of Email for Correspondence: Corporate bank customers are now required to provide TIN as a pre-condition for opening or maintaining their accounts. Email correspondence is now an acceptable means of communication with tax authorities.
  4. Removal of Restrictions Regarding Insurance Companies: Insurance companies are now able to carry their losses forward indefinitely and life and non-life insurance businesses would no longer be liable to special minimum tax provision.
  5. Exceptions to Excess Dividend Tax (EDT) Provisions: EDT would now apply only to untaxed distributions other than profits specifically exempted from tax and franked investment income1. This amendment removes the element of double taxation caused by EDT and should encourage corporate savings and retention of profits.
  6. Expansion of The Categories of Exempt Income: The categories of exempt income have now been expanded to include the profit of small companies, dividends declared by small manufacturing companies, rental income of Real Estate Investment Companies (REICs) etc.
  7. Ministerial Approval No Longer Required: Expenses incurred under management services between non-related parties would no longer require ministerial approval to be tax-deductible. In other words, any entity which enters into a management service agreement with an unrelated entity is now able to claim tax deductions for management fees without the approval of the Minister or the National Office for Technology Acquisition and Promotion (NOTAP).
  8. New Company Income Tax (CIT) Rates: The Act introduces new CIT rates, based on companies' revenue. As such, small companies (with turnover of less than N25 million) will pay 0%, medium companies (with N25million to N100million turnover) will pay 20%, while large companies (with more than N100million turnover) will pay 30% CIT. This provision is intended to provide tax relief to small and medium sized companies (SMEs).
  9. Introduction of Early Tax Payment Bonus: Under the Act, taxpayers who pay their tax liability at least 90 days before due date would be entitled to a bonus of 2% and 1% of the tax paid for medium and large companies respectively. While this is laudable, it may not achieve its aim of timely payment of tax because the proposed bonus may not be as beneficial to the taxpayer as the interest the tax payable would yield if invested, even in risk-free securities.
  10. Tax Exemption on Assets Sold in a Restructuring Exercise: Capital Gain Tax would no longer be applicable to assets sold or transferred to a related party in a restructuring exercise. This exemption only applies when the acquired assets are not disposed of within 365 days from the date of restructuring.


The new Act is a welcome development to the tax landscape in Nigeria as it seeks to expand the tax net to include businesses operating on digital platforms while also increasing VAT rates from 5% to 7.5%. It is expected this would drive increased revenue and foster economic growth.

The Act also seeks to promote the growth of small businesses, particularly with the exemptions introduced for small and medium sized enterprises.

While these interventions are commendable, there is need for the Federal Government of Nigeria (FGN) to be more efficient in delivering people centered infrastructure projects whilst demonstrating accountability on the utilization of these additional fiscal revenues in Nigeria.

We are available to assist you on this and other legal and tax related issues you may have at any time.


1. The excess dividend tax (EDT) provision is one of the anti-avoidance provisions in the Companies Income Tax Act (CITA). It previously treated the dividend declared by a company, as its total profit, and subjected it to tax, where the dividend of a company was higher than the total profits of the company for the year.

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