Ensuring Compliance with Finance Act 2020: A Comprehensive Guide.

Introduction:

Navigating the ever-evolving landscape of tax laws and regulations is a formidable challenge for businesses in Nigeria. The Finance Act 2020, a significant legislative development, has introduced numerous changes aimed at enhancing fiscal responsibility, promoting economic growth and improving the ease of doing business in the country. Ensuring compliance with this act is crucial to avoid penalties and legal issues. In this article, we will provide a comprehensive guide to help businesses understand and meet their compliance obligations under the Finance Act 2020.

Key Areas of Compliance under the Finance Act 2020:

1. Income Tax Compliance: Review and update your income tax calculations to ensure accuracy under the new tax rates and thresholds introduced by the act. Evaluate any tax incentives and reliefs that may apply to your business, such as those for investments in specific sectors.
2. Digital Services Tax (DST) Compliance: If your business provides digital services in Nigeria, determine whether you are liable to pay DST and ensure accurate calculation, remittance and reporting of the tax.
3. Transfer Pricing Compliance: Strengthen your transfer pricing documentation and practices to comply with the act’s provisions, particularly the arm’s length pricing principles.
4. Capital Gains Tax (CGT) Compliance: Assess the impact of CGT amendments on your business, particularly if you are involved in asset sales, mergers, or acquisitions.
5. Tax Loss Utilization: Review your tax loss utilization strategies in light of the limitations imposed by the act.
6. Environmental Levies Compliance: Develop procedures for accurately reporting and remitting environmental levies if your business is subject to these levies.
7. VAT Compliance: Ensure that your VAT calculations and reporting are updated to reflect the increased VAT rate of 7.5% as per the act.
8. Tax Documentation and Record-Keeping: Maintain meticulous records of your financial transactions and tax-related documents to demonstrate compliance with the act.

Steps to Ensure Compliance:

1. Stay Informed: Continuously monitor changes in tax laws and regulations to remain up-to-date with compliance requirements.
2. Review Current Tax Structures: Evaluate your current tax structures and strategies to ensure they align with the provisions of the Finance Act 2020.
3. Update Accounting Systems: Ensure that your accounting systems and software are updated to incorporate changes in tax rates, thresholds and reporting requirements.
4. Engage Tax Professionals: Seek the assistance of experienced tax professionals who are knowledgeable about Nigerian tax law and can provide guidance on compliance.
5. Conduct Regular Audits: Implement regular internal audits to assess compliance with the act and identify areas that may require correction or improvement.

Benefits of Ensuring Compliance:

1. Risk Mitigation: Compliance reduces the risk of penalties, interest charges and legal issues associated with non-compliance.
2. Cost Savings: Avoiding errors and penalties can lead to cost savings and improved profitability.
3. Reputation Management: Compliance enhances your reputation and credibility with stakeholders, including customers, investors and regulatory authorities.
4. Competitive Advantage: Businesses that consistently meet their compliance obligations can maintain a competitive edge in the marketplace.

Conclusion:

Compliance with the Finance Act 2020 is not merely a legal requirement; it is an essential aspect of responsible and sustainable business operations in Nigeria. By staying informed, reviewing tax structures, updating accounting systems, engaging tax professionals, and conducting regular audits, businesses can ensure compliance with the act while reaping the associated benefits of risk mitigation, cost savings, reputation enhancement and competitive advantage.

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.