finance act 2023 – Sunmola David & CO

Impact of Nigeria Finance Act 2023 on Cross-Border Transactions

Leave a Comment / TAX SERVICES / By Lawson Lawson

Introduction: Cross-border transactions play a vital role in Nigeria’s economy, fostering international trade, investment, and economic growth. The Nigeria Finance Act 2023 introduces significant changes to the taxation of cross-border transactions, aiming to enhance transparency, promote tax compliance, and strengthen Nigeria’s position in the global market. As a reputable accounting firm in Nigeria, we explore the key provisions in the Finance Act 2023 that impact cross-border transactions and provide insights into the implications for businesses engaged in international trade and investment. 1. Transfer Pricing Regulations: The Finance Act 2023 emphasizes transfer pricing regulations to prevent the manipulation of prices in cross-border transactions between related parties. It mandates that transactions between related parties must be conducted at arm’s length, ensuring that prices are aligned with market values. The introduction of stringent transfer pricing regulations promotes tax transparency and helps prevent profit shifting to low-tax jurisdictions. 2. Controlled Foreign Company (CFC) Rules: The Finance Act 2023 introduces Controlled Foreign Company (CFC) rules, targeting the taxation of passive income earned by foreign subsidiaries of Nigerian companies. Under these rules, passive income earned by CFCs may be subject to taxation in Nigeria. The CFC rules aim to prevent tax base erosion and ensure that income earned by foreign subsidiaries is appropriately taxed in Nigeria. 3. Digital Services Tax (DST): In response to the digital economy’s growing significance, the Finance Act 2023 introduces a Digital Services Tax (DST) on certain digital transactions. This tax applies to non-resident companies providing digital services to Nigerian customers, and it is levied at a specified percentage of the gross transaction value. The DST seeks to capture revenue from digital transactions and ensure that digital service providers contribute to Nigeria’s tax revenue. 4. Withholding Tax on Cross-Border Transactions: The Finance Act 2023 enhances withholding tax requirements for cross-border transactions. It may require businesses to withhold tax on certain payments made to non-resident individuals or companies, such as royalties, technical fees, and dividends. The withholding tax provisions aim to ensure that non-resident taxpayers meet their tax obligations in Nigeria. 5. Avoidance of Double Taxation: The Act addresses the issue of double taxation by providing tax credits or exemptions for taxes paid in foreign jurisdictions. This measure ensures that income subject to taxation in both Nigeria and another country is not taxed twice. The avoidance of double taxation promotes international trade and investment, encouraging foreign investors to do business in Nigeria. Conclusion: The Nigeria Finance Act 2023 introduces significant changes to the taxation of cross-border transactions, aligning the country’s tax laws with global best practices and fostering tax transparency. Through transfer pricing regulations, CFC rules, the Digital Services Tax, withholding tax enhancements, and measures to avoid double taxation, the Act seeks to create a more equitable and conducive environment for businesses engaged in international trade and investment. As a reputable accounting firm in Nigeria, we advise businesses involved in cross-border transactions to stay informed about the implications of the Finance Act 2023 and seek professional guidance to ensure compliance with the updated tax regulations. By embracing these changes, businesses can navigate the complexities of cross-border taxation, promote tax compliance, and contribute to Nigeria’s economic growth and global competitiveness. 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.

Enhancing Tax Compliance: Digitization Efforts in the Nigeria Finance Act 2023

Leave a Comment / TAX SERVICES / By Lawson Lawson

Introduction: Tax compliance is a crucial aspect of a well-functioning economy, enabling governments to collect revenues efficiently and fund public services. Recognizing the significance of tax compliance, the Nigeria Finance Act 2023 introduces a series of digitization efforts aimed at modernizing tax administration and improving compliance measures. As a reputable accounting firm in Nigeria, we explore the key digitization initiatives in the Finance Act 2023 and their potential impact on tax compliance and revenue generation. 1. Electronic Tax Filing and Payment: The Finance Act 2023 emphasizes the adoption of electronic tax filing and payment systems. This initiative replaces traditional paper-based processes with online platforms, allowing taxpayers to file tax returns and make payments electronically. Electronic tax filing and payment enhance convenience for taxpayers, reduce administrative burdens, and minimize errors, leading to more accurate and timely tax reporting. 2. Digital Tax Assessment and Audits: With the aim of increasing efficiency and transparency, the Finance Act 2023 introduces digital tax assessment and audits. Tax authorities will utilize data analytics and artificial intelligence to assess tax liabilities and conduct audits with greater precision and effectiveness. Digital tax assessment enables tax authorities to identify high-risk cases and non-compliant taxpayers more efficiently, promoting fair tax treatment for all. 3. Online Taxpayer Portals: The Act promotes the development of online taxpayer portals, providing taxpayers with secure and personalized access to their tax information. Through these portals, taxpayers can view their tax liabilities, payment history, and correspondence with tax authorities. Online taxpayer portals empower individuals and businesses to stay informed about their tax obligations, reducing the likelihood of inadvertent non-compliance. 4. Data Exchange and Cooperation: To enhance tax enforcement, the Finance Act 2023 promotes data exchange and cooperation among tax authorities and relevant institutions. It authorizes the Nigerian government to enter into international agreements for the exchange of tax-related information. Data exchange and cooperation enable the tracking of cross-border financial transactions and support the detection of tax evasion and aggressive tax planning. 5. Whistleblower Protection: The Act provides robust protection for whistleblowers who report tax fraud and non-compliance. Whistleblowers are shielded from retaliation and offered incentives or rewards for providing credible information leading to the discovery of tax irregularities. Whistleblower protection encourages individuals with knowledge of tax evasion to come forward, supporting the government’s efforts to combat tax non-compliance. Conclusion: The Nigeria Finance Act 2023 marks a transformative step towards modernizing tax administration and enhancing tax compliance through digitization efforts. By embracing electronic tax filing and payment systems, digital tax assessment and audits, online taxpayer portals, data exchange, and whistleblower protection, the Act fosters a more efficient and transparent tax environment in Nigeria. As a reputable accounting firm in Nigeria, we commend these digitization efforts and encourage taxpayers to leverage the opportunities presented by the Finance Act 2023. By embracing digitization, individuals and businesses can streamline their tax compliance processes, minimize errors, and contribute to a fair and sustainable tax system that benefits both the government and the Nigerian economy as a whole. 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.