July 24, 2023

Introduction: Small and Medium Enterprises (SMEs) are the backbone of Nigeria’s economy, driving innovation, creating jobs, and contributing significantly to economic growth. Recognizing the vital role played by SMEs, the Nigeria Finance Act of 2019 introduces a range of tax incentives to support their development and foster a conducive business environment. As a leading accounting firm in Nigeria, we explore the tax incentives provided under the Nigeria Finance Act 2019 and their potential impact on SMEs. 1. Value Added Tax (VAT) Exemption Threshold: The Finance Act 2019 raises the VAT exemption threshold for SMEs, providing significant relief for businesses with an annual turnover of 25 million Naira or less. SMEs falling within this threshold are now exempt from registering for and charging VAT on their goods and services. This measure aims to ease the administrative burden for smaller businesses and stimulate growth in the sector. Implication: The VAT exemption threshold allows SMEs to retain a larger portion of their revenue, enhancing their competitiveness and financial sustainability. It encourages growth and investment in SMEs, contributing to job creation and economic development. 2. Export Expansion Grant (EEG) Scheme: The Finance Act 2019 reinstates the Export Expansion Grant (EEG) scheme, which provides incentives to SMEs engaged in non-oil exports. Under this scheme, eligible SMEs are entitled to a grant calculated based on the value of their non-oil export volume. The reintroduction of the EEG seeks to promote export-oriented activities and reduce reliance on oil revenues. Implication: The EEG scheme incentivizes SMEs to explore international markets and diversify their revenue streams through non-oil exports. By accessing the grant, SMEs can improve their competitiveness in the global market and boost foreign exchange earnings for Nigeria. 3. Pioneer Status Incentive: The Finance Act 2019 extends the pioneer status incentive to SMEs, offering qualifying businesses a tax holiday for an initial period of three years. SMEs engaged in pioneer industries that contribute to economic development and technology transfer may be eligible for this incentive. The pioneer status provides relief from corporate income tax, allowing SMEs to channel their resources towards growth and expansion. Implication: The pioneer status incentive encourages SMEs to invest in priority sectors and innovative industries, supporting economic diversification and sustainable development. SMEs can take advantage of the tax holiday to strengthen their competitiveness and establish a solid foundation for long-term success. 4. Minimum Tax Exemption: The Finance Act 2019 exempts SMEs with an annual turnover of 25 million Naira or less from paying minimum tax. Minimum tax is typically based on a percentage of gross turnover and applies regardless of profitability. By exempting qualifying SMEs, the Act reduces their tax burden and provides breathing space during early stages of growth. Implication: The minimum tax exemption provides a lifeline for SMEs during the critical initial years, allowing them to allocate resources strategically to expand their operations, hire more employees, and innovate. Conclusion: The Nigeria Finance Act 2019 demonstrates the government’s commitment to supporting SMEs as engines of economic growth and job creation. By providing tax incentives such as the VAT exemption threshold, the Export Expansion Grant (EEG) scheme, pioneer status incentives, and minimum tax exemption, the Act empowers SMEs to thrive in a competitive business environment. As an accounting firm in Nigeria, we encourage SMEs to take advantage of these tax incentives and leverage them to boost their financial resilience and competitiveness. By understanding and optimizing these provisions, SMEs can chart a path towards sustainable growth, contributing significantly to Nigeria’s economic prosperity and development. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction The Nigeria Finance Act of 2019 represents a significant step towards enhancing tax collection efficiency in the country. With the aim of bolstering revenue generation, streamlining tax administration, and fostering economic growth, this legislation introduces a series of reforms that address the challenges faced by tax authorities. As a leading accounting firm in Nigeria, we delve into the key reforms introduced in the Nigeria Finance Act 2019 and their implications for improving tax collection efficiency. 1. Digital Services Tax (DST): In response to the growing digital economy and challenges in taxing digital transactions, the Finance Act 2019 introduces the Digital Services Tax (DST). Foreign companies providing digital services to Nigerian consumers without a physical presence in the country are now subject to DST at a rate of 2% of their gross revenue. This reform aims to capture tax from previously untaxed digital activities and ensures that multinational digital service providers contribute their fair share to Nigeria’s tax revenue. Implication: The DST represents a progressive step towards taxing the digital economy and leveling the playing field for local businesses. Tax authorities can now capture revenue from digital transactions that were previously difficult to track, thus enhancing overall tax collection efficiency. 2. Value Added Tax (VAT) Rate Increase: The Finance Act 2019 increases the Value Added Tax (VAT) rate from 5% to 7.5%, effective from February 1, 2020. This measure is aimed at broadening the government’s revenue base and strengthening its ability to provide essential services and infrastructure. The increase in VAT is expected to significantly boost tax revenues and facilitate funding for critical developmental projects. Implication: The VAT rate increase will directly impact businesses and consumers, leading to increased tax revenues for the government. Businesses need to adjust their pricing strategies and ensure compliance with the new VAT rate, while consumers may experience a rise in the cost of goods and services. 3. Expansion of Taxable Goods and Services: The Finance Act 2019 expands the list of goods and services subject to VAT, including previously exempted items like lease rentals, aircraft maintenance, and passenger transportation services. By broadening the scope of VAT, the Act seeks to increase tax collection on various economic activities. Implication: The expansion of VAT coverage will lead to increased tax collection from a wider range of goods and services. Businesses offering the newly taxable items will need to ensure accurate tax compliance, and consumers will experience changes in prices for the affected goods and services. 4. Amendment of Stamp Duties Act: The Act amends the Stamp Duties Act to address certain ambiguities in the collection and administration of stamp duties. The reforms introduce electronic stamping to facilitate a more efficient and transparent process, encouraging greater compliance and boosting revenue collection from stamp duties. Implication: The adoption of electronic stamping is expected to streamline the stamp duty collection process, making it easier for taxpayers to comply with their stamp duty obligations. This reform will likely result in increased revenue collection for the government. Conclusion: The Nigeria Finance Act 2019 introduces significant reforms aimed at enhancing tax collection efficiency and fostering economic growth in the country. By implementing measures such as Digital Services Tax (DST), VAT rate increase, expansion of taxable goods and services, and electronic stamping, the government seeks to capture previously untapped revenue streams and improve tax compliance. As an accounting firm in Nigeria, we understand the importance of staying abreast of these reforms and helping businesses and individuals navigate the changing tax landscape. By proactively adjusting strategies to align with the new regulations, taxpayers can contribute to the country’s development while optimizing their tax planning in a compliant and responsible manner. Embracing these reforms is essential for Nigeria’s sustainable economic growth and the continued prosperity of its citizens. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction: In the complex world of international business, transfer pricing plays a crucial role in determining the prices of goods, services, and intangible assets exchanged between related parties. To comply with Nigerian regulations and ensure fairness in cross-border transactions, multinational enterprises must employ appropriate transfer pricing methods. Selecting the right methodology is essential for demonstrating compliance with the arm’s length principle and avoiding potential tax disputes. In this article, we explore various transfer pricing methods and how Nigerian companies can choose the most suitable approach for their transactions. Understanding Transfer Pricing Methods Transfer pricing methods are analytical techniques used to establish the arm’s length price of transactions between related parties. The Organisation for Economic Co-operation and Development (OECD) and Nigerian transfer pricing regulations recognize several methods, each with its strengths and limitations. The choice of the method depends on the availability of reliable data and the nature of the transaction. 1. Comparable Uncontrolled Price (CUP) Method: The CUP method compares the price of a product or service in a related-party transaction with the price of a similar product or service in an unrelated party transaction. This method is preferred when reliable data on comparable transactions are available. 2. Resale Price Method (RPM): The RPM compares the gross profit margin earned by a reseller in a related-party transaction with the gross profit margin earned by an independent reseller in a comparable transaction. This method is suitable for situations where a company purchases goods from a related party and resells them to independent customers. 3. Cost Plus Method (CPM): The CPM involves adding an appropriate markup to the cost incurred by a related party in providing goods, services, or intangible property to another related party. This method is commonly used when providing routine or contract manufacturing services. 4. Transactional Net Margin Method (TNMM): The TNMM compares the net profit margin earned in a related-party transaction with the net profit margin realized in a comparable transaction between unrelated parties. This method is suitable for a wide range of transactions and is often used for routine services. 5. Profit Split Method (PSM): The PSM allocates the combined profits of related parties involved in a controlled transaction based on their relative contributions to the value creation. This method is applied when it is challenging to separate the individual contributions of each party. Selecting the Appropriate Transfer Pricing Methodology Choosing the most appropriate transfer pricing method for Nigerian transactions requires a thorough understanding of the transaction’s characteristics and the availability of reliable data. Here are some considerations to guide Nigerian companies in making the right choice: Conclusion: Navigating transfer pricing methods can be complex for Nigerian companies engaged in international transactions. The key to successful compliance lies in selecting the most appropriate methodology for each transaction. By understanding the nuances of each method and seeking professional advice from experienced accounting and tax experts, Nigerian businesses can ensure compliance with transfer pricing regulations, mitigate tax risks, and foster transparent and fair international business practices. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction: Transfer pricing, the practice of setting prices for transactions between related parties, has become a focal point for tax authorities worldwide. Nigeria, like many other countries, has implemented robust transfer pricing regulations to ensure that multinational enterprises conduct intercompany transactions at arm’s length and prevent tax evasion through profit shifting. One critical aspect of compliance with Nigerian transfer pricing regulations is the documentation requirement. In this article, we explore the essential aspects of transfer pricing documentation and its significance in ensuring compliance with Nigerian regulations. The Importance of Transfer Pricing Documentation Transfer pricing documentation is a comprehensive record of related-party transactions and the methods used to determine transfer prices. The documentation serves as evidence to demonstrate that the transactions are conducted at arm’s length, as if the parties were unrelated, and are in accordance with the arm’s length principle as defined by the Nigerian tax authorities. The documentation requirement not only helps multinational enterprises fulfill their compliance obligations but also provides tax authorities with the necessary information to assess the appropriateness of transfer prices and identify potential tax base erosion and profit shifting. Types of Transfer Pricing Documentation: Under Nigerian transfer pricing regulations, taxpayers are required to prepare and maintain two primary types of transfer pricing documentation: Transfer Pricing Documentation Thresholds: The Nigerian transfer pricing regulations apply to taxpayers meeting certain thresholds for related-party transactions. For the fiscal year, the thresholds for preparing and maintaining transfer pricing documentation are as follows: Contemporaneous Documentation Requirement: One critical aspect of transfer pricing documentation in Nigeria is the “contemporaneous” requirement. Taxpayers must ensure that the documentation is prepared and available at the time of filing their tax returns. Contemporaneous documentation demonstrates that the transfer pricing policies were established before the related-party transactions occurred, ensuring that they are not retroactively adjusted to achieve a desired tax outcome. Penalties for Non-Compliance: Non-compliance with transfer pricing documentation requirements can lead to significant penalties. Nigerian taxpayers failing to meet the documentation obligations or submitting incomplete or inaccurate documentation may face transfer pricing adjustments, penalties, and interest on any adjustments made. Ensuring Compliance with Nigerian Regulations: To ensure compliance with Nigerian transfer pricing regulations and avoid potential penalties, businesses should consider the following: Conclusion: Transfer pricing documentation is a critical aspect of compliance with Nigerian regulations and provides a transparent record of related-party transactions. As tax authorities increasingly focus on transfer pricing to prevent profit shifting and tax avoidance, businesses must prioritize the preparation of robust documentation. By ensuring compliance with the documentation requirements, Nigerian companies can demonstrate their commitment to fair business practices and build trust with tax authorities while mitigating the risk of transfer pricing audits and penalties. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction: The Nigeria Finance Act of 2019 represents a significant milestone in the country’s ongoing efforts to strengthen its fiscal policies and promote economic growth. Enacted to complement the annual budget, this legislation introduces several key amendments to the tax and regulatory framework. As a leading accounting firm in Nigeria, we present an overview of the Nigeria Finance Act 2019, highlighting its key amendments and implications for businesses and individuals. 1. Value Added Tax (VAT) Rate Increase: One of the most notable changes introduced by the Finance Act 2019 is the increase in the Value Added Tax (VAT) rate. The Act raised the VAT rate from 5% to 7.5%, effective from February 1, 2020. This move was aimed at expanding the government’s revenue base and enhancing its capacity to provide essential services and infrastructure. Businesses and consumers should take this adjustment into account when budgeting and pricing goods and services. 2. Tax Exemption Threshold for Small Businesses: The Finance Act 2019 provides relief for small businesses by raising the threshold for tax exemption. Micro, Small, and Medium Enterprises (MSMEs) with an annual turnover of 25 million Naira or less are now exempt from paying Companies Income Tax (CIT). This amendment aims to support small businesses, encouraging their growth and contribution to the Nigerian economy. 3. Introduction of Digital Services Tax (DST): In response to the global challenges of taxing digital transactions, the Finance Act 2019 introduces the Digital Services Tax (DST). Foreign companies that provide digital services to Nigerian consumers without a physical presence in the country are now subject to DST at a rate of 2% of their gross revenue. This measure seeks to ensure that multinational digital service providers contribute their fair share of taxes to the Nigerian economy. 4. Amendments to Petroleum Profits Tax (PPT) and Companies Income Tax (CIT): The Finance Act 2019 introduces amendments to the Petroleum Profits Tax (PPT) and Companies Income Tax (CIT) provisions. Notable changes include eliminating the tax exemption for dividends distributed from petroleum profits and clarifying the rules on taxation of Real Estate Investment Companies (REICs). These amendments aim to align tax regulations with international best practices and enhance transparency in the oil and gas sector. 5. Capital Gains Tax (CGT) and Stamp Duty Amendments: The Act amends the Capital Gains Tax (CGT) and Stamp Duty provisions to address certain shortcomings in the existing tax framework. These amendments include exemptions from CGT for companies undergoing a restructuring process and revised rates for stamp duties on financial transactions. The revisions aim to simplify tax administration and promote investment in the Nigerian financial sector. Implications and Conclusion: The Nigeria Finance Act 2019 brings about significant changes to the tax landscape, with both benefits and challenges for businesses and individuals. While the increase in VAT and introduction of DST may increase tax liabilities for some companies, the tax exemption for small businesses provides much-needed relief for MSMEs. Additionally, the amendments to CGT and Stamp Duty provisions are expected to streamline transactions in the financial sector. As an accounting firm in Nigeria, we emphasize the importance of understanding and adapting to these tax reforms. Businesses should assess the implications of the VAT rate increase on their pricing strategies and consider the impact of DST on their digital services. Small businesses can leverage the increased tax exemption threshold to reinvest in their growth and expansion. By staying informed and proactively aligning their financial strategies with the changes brought about by the Finance Act 2019, businesses and individuals can navigate the evolving tax landscape and contribute to Nigeria’s economic development. As the country continues its journey towards fiscal reform, we encourage taxpayers to seek professional advice to ensure compliance and optimize their tax planning for a prosperous future. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction: As Nigeria seeks to bolster its economic growth and improve revenue generation, the Finance Act of 2023 introduces a series of tax reforms aimed at modernizing the tax system and fostering a conducive environment for businesses. These reforms encompass various sectors and taxpayer categories, with the ultimate goal of ensuring sustainable economic development. As a prominent accounting firm in Nigeria, we analyze the prospects and challenges of the tax reforms introduced in the Nigeria Finance Act 2023. 1. Prospect: Simplification of Tax Compliance: One of the primary objectives of the Finance Act 2023 is to simplify tax compliance for individuals and businesses. The Act proposes measures such as enhancing the use of technology for tax filing, introducing e-invoicing systems, and implementing online tax payment platforms. By reducing the administrative burden and streamlining tax processes, the reforms hold the promise of encouraging greater tax compliance among taxpayers, thereby expanding the tax base and increasing revenue collection. Challenge: Adoption of Technology: While the move towards digitization is promising, its successful implementation hinges on the efficient adoption of technology at various levels, including government agencies, businesses, and individuals. Ensuring robust cyber security measures, providing adequate training, and bridging the digital divide in certain regions are crucial to realizing the full benefits of the proposed technological enhancements. 2. Prospect: Attracting Foreign Investment through Incentives: The Finance Act 2023 seeks to attract foreign investment and stimulate economic growth by introducing tax incentives and exemptions for specific sectors and activities. The Act outlines tax benefits for industries that contribute significantly to job creation, export promotion, and infrastructure development. These incentives are intended to position Nigeria as an attractive destination for foreign investors and foster a conducive environment for business expansion. Challenge: Balancing Revenue Losses and Economic Gains: While tax incentives can be instrumental in attracting foreign investment, striking the right balance between offering attractive incentives and ensuring sufficient revenue generation remains a challenge. Careful consideration must be given to the fiscal impact of tax incentives to avoid potential revenue shortfalls that could impact public finances and service delivery. 3. Prospect: Sustainable Development Goals (SDGs) Integration: The Finance Act 2023 demonstrates Nigeria’s commitment to achieving the United Nations Sustainable Development Goals (SDGs) by incorporating tax incentives for businesses that align with these objectives. Companies contributing to environmental sustainability, social responsibility, and renewable energy initiatives may receive tax benefits, encouraging the private sector to actively participate in advancing the country’s sustainable development agenda. Challenge: Monitoring and Evaluation: To ensure the effectiveness of SDG-aligned tax incentives, robust monitoring and evaluation mechanisms are essential. The government must establish clear criteria and performance indicators to assess the impact of these incentives on sustainable development outcomes. Continuous monitoring will enable policymakers to fine-tune the incentives and align them with changing economic and social needs. 4. Prospect: Improved Tax Enforcement and Compliance: The Finance Act 2023 aims to strengthen tax enforcement measures to curb tax evasion and increase compliance. The Act introduces stricter penalties for non-compliance and establishes a framework for cooperation between tax authorities and other regulatory agencies to tackle tax-related offenses effectively. Challenge: Taxpayer Education and Awareness: Enhanced enforcement measures must be complemented by taxpayer education and awareness campaigns to ensure that taxpayers fully understand their obligations and rights. Educating the public about the benefits of tax compliance and the consequences of evasion will foster a culture of voluntary compliance, reducing the need for punitive measures. Conclusion: The Nigeria Finance Act 2023 presents a promising landscape for tax reforms, offering prospects for economic growth, sustainable development, and improved tax compliance. However, the successful implementation of these reforms will require a collaborative effort between the government, businesses, and citizens. As a leading accounting firm in Nigeria, we stand ready to support businesses in navigating the complexities of the new tax regulations, maximizing opportunities, and overcoming challenges to contribute to the nation’s economic prosperity and development. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

Introduction: Tax avoidance and evasion have long been global concerns, hindering economic growth and limiting the resources available for governments to invest in public services and infrastructure. In Nigeria, combating tax avoidance and evasion has been a top priority for the government. In response to these challenges, the Nigeria Finance Act of 2022 introduces several measures aimed at curbing these practices and promoting transparency and fairness in the tax system. As a leading accounting firm in Nigeria, we present insights into the key provisions of the Nigeria Finance Act 2022 and how they address tax avoidance and evasion. 1. Strengthening Transfer Pricing Regulations: The Finance Act 2022 places a strong emphasis on addressing transfer pricing abuses, which are often employed as a means of shifting profits to low-tax jurisdictions. To achieve this, the Act aligns Nigeria’s transfer pricing rules with international best practices, as outlined by the Organization for Economic Co-operation and Development (OECD). Multinational corporations (MNCs) engaged in related-party transactions are now required to maintain detailed documentation supporting the arm’s length nature of these transactions. This move enhances transparency and empowers tax authorities to scrutinize intercompany dealings, reducing the potential for profit manipulation and tax evasion. 2. Introduction of Controlled Foreign Company (CFC) Rules: The Nigeria Finance Act 2022 introduces Controlled Foreign Company (CFC) rules, aimed at preventing tax avoidance through the use of foreign subsidiaries in low-tax jurisdictions. Under these rules, Nigerian-resident companies that control foreign companies are required to include the income of those foreign entities in their tax computation. This measure ensures that profits earned abroad are subject to Nigerian tax, discouraging the shifting of profits to tax havens and encouraging greater transparency in multinational corporations’ global operations. 3. Mandatory Country-by-Country Reporting (CbCR): In an effort to enhance tax transparency and monitor the global activities of MNCs, the Finance Act 2022 introduces mandatory Country-by-Country Reporting (CbCR). Large multinational groups with a consolidated group revenue above a specified threshold must now disclose financial and tax-related information for each jurisdiction in which they operate. This reporting requirement enables tax authorities to identify potential tax avoidance practices and take appropriate actions to ensure tax compliance. 4. Strengthened General Anti-Avoidance Rule (GAAR): The Nigeria Finance Act 2022 enhances the effectiveness of the General Anti-Avoidance Rule (GAAR), designed to prevent the misuse of legal structures solely for tax avoidance purposes. GAAR empowers tax authorities to disregard transactions or arrangements that lack commercial substance but are created primarily to obtain tax benefits. By strengthening GAAR, the Act provides a robust mechanism to counter tax avoidance schemes that exploit loopholes in the tax legislation. 5. Whistleblower Incentives: Recognizing the importance of public participation in combating tax evasion, the Finance Act 2022 introduces whistleblower incentives to encourage individuals with knowledge of tax offenses to come forward. Whistleblowers can now receive rewards for providing credible information that leads to the recovery of tax revenues lost due to evasion or avoidance. This provision is expected to play a crucial role in uncovering tax evasion and deterring potential offenders. Conclusion: The Nigeria Finance Act 2022 marks a significant step forward in addressing tax avoidance and evasion in the country. With these new provisions in place, Nigeria’s tax authorities are better equipped to tackle aggressive tax planning practices and ensure that all taxpayers, including multinational corporations, meet their tax obligations transparently and fairly. As a leading accounting firm in Nigeria, we emphasize the importance of compliance with these new regulations to avoid potential penalties and reputational risks. By working together to create a more transparent and equitable tax environment, we can foster economic growth and development for the benefit of all Nigerians. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036