The House of Representatives has approved recommendations from its Finance Committee’s report on the Tax Reform Bills, following a clause-by-clause review. These reforms were initiated by President Bola Tinubu and aimed at overhauling Nigeria’s tax framework.
Amendments were made at plenary to address concerns raised by stakeholders, including the Nigerian Governors Forum, Trade Union Congress (TUC), Arewa Consultative Forum, Supreme Council for Sharia in Nigeria (SCIN), and the League of Northern Democrats.
President Tinubu had, on October 3, 2024, requested the National Assembly to pass several bills: the Nigeria Tax Bill, Tax Administration Bill, Joint Revenue Board Establishment Bill, and Nigeria Revenue Service Bill.
The amendments addressed contentious areas such as:
- Revenue sharing formula
- The proposed increase in VAT
- Inheritance tax
- Taxation of free trade zones
- The proposed discontinuation of funding for TETFund, NITDA, and NASENI by 2030
Key Changes Include:
- VAT Rate: The VAT rate will remain at 7.5%, instead of increasing to 15% by 2030 as originally proposed.
- VAT Revenue Sharing: The new distribution formula allocates 10% to the federal government, 55% to states and the FCT, and 35% to local governments. Revenue for states and local governments will be further distributed as:
- 50% equally
- 20% based on population
- 30% based on consumption (determined by place of consumption, not where returns are filed)
- Derivation Formula: The Tax Administration Bill’s proposed increase of VAT derivation from 20% to 60%—which faced criticism from northern stakeholders—was removed.
- Inheritance Tax and Agency Funding: The Finance Committee, led by James Faleke, deleted the proposed inheritance tax and the plan to discontinue funding for NASENI, TETFund, and NITDA.
- Free Trade Zones: Operators must limit activities to 75% exports and 25% domestic trade to qualify for tax benefits.
- Presidential Powers: The President’s power to grant tax exemptions is now subject to National Assembly approval.
- Terminology Update: The term “ecclesiastical” has been replaced with “religious” in relevant clauses.
- Nigeria Revenue Service (NRS): The Federal Inland Revenue Service (FIRS) will be replaced by the Nigeria Revenue Service (NRS), which will handle federal tax collection but exclude individual taxpayers in states and the FCT.
- The NRS board will consist of six executive directors from each geopolitical zone, appointed by the President.
- Each state and the FCT will have one representative on the board.
- The NRS will receive a 4% cost-of-collection fee, pending National Assembly approval.
- The board’s secretary must be a qualified lawyer, chartered accountant, or chartered secretary at the rank of Assistant Director or above.
- Agricultural Tax Exemptions: Tax exemptions will be extended to certain agricultural sectors—including livestock, forestry, dairy, animal feed, and cocoa processing—for the first five years of operation.
- Military Exemptions: The salaries of Nigerian armed forces personnel will be exempt from personal income tax.
Repeals and Amendments:
Once passed into law, these bills will repeal several existing tax-related laws, including:
- Companies Income Tax Act (1979)
- Value Added Tax Act (1993)
- Personal Income Tax Act (1993)
- Federal Inland Revenue Service (Establishment) Act (2007)
- Capital Gains Tax Act (1967)
- Stamp Duties Act (1939)
- Casino Act (1965)
- Deep Offshore and Inland Basin Act
- Industrial Development (Income Tax Relief) Act (1971)
- Petroleum Profits Tax Act (1959)
- Venture Capital (Incentives) Act (1993)
The following laws will be amended:
- Petroleum Industry Act (2021)
- Nigeria Export Processing Zones Act
- Oil and Gas Free Trade Zone Act
- National Information Technology Development Agency Act
- Tertiary Education Trust Fund (Establishment, Etc.) Act
- National Agency for Science and Engineering Infrastructure Act
- Customs and Excise Tariffs Act
- National Lottery Act (2005)
- Nigerian Minerals and Mining Act (2007)
- Nigeria Start-up Act (2022)
- Export (Incentives and Miscellaneous Provisions) Act
- Companies Income Tax (Significant Economic Presence) Order (2020)
- Petroleum (Drilling and Production) Regulations (1969)
Additionally, the Value Added Tax (Modification) Order (2021) will be revoked.
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