The Nigeria Finance Act of 2021 represents a continuation of the government’s commitment to fiscal reforms and economic development. As a reputable accounting firm in Nigeria, we recognize the significance of staying abreast of the latest legislative changes to assist businesses and individuals in navigating the evolving tax landscape. In this article, we will provide an overview of the key highlights of the Nigeria Finance Act 2021 and their implications for taxpayers and the economy.
1. Introduction of the Finance Act 2021 (Value Added Tax) Order
The Finance Act 2021 introduced amendments to the Value Added Tax (VAT) regime in Nigeria. Notably, the Act expanded the list of VAT-exempt items to include essential goods and services such as pharmaceuticals, medical supplies, educational materials, and basic food items. This move is aimed at easing the burden on low-income earners and supporting the welfare of vulnerable populations while providing businesses with additional clarity on VAT-exempt transactions.
2. VAT Registration Threshold for Small Businesses
The Act raised the VAT registration threshold for small businesses from a turnover of N25 million to N50 million. This measure reduces compliance obligations for smaller businesses and encourages entrepreneurial activities. Businesses with turnovers below the new threshold are now exempt from VAT registration and remittance, allowing them to focus on growth and expansion.
3. Introduction of Excise Duty on Telecommunications Services
The Nigeria Finance Act 2021 introduced excise duty on telecommunications services, adding a 7.5% levy on services provided by telecommunications companies. This measure aims to diversify government revenue sources and create a more equitable tax system by imposing taxes on a sector that has experienced significant growth in recent years.
4. Amendments to Petroleum Profit Tax (PPT) Regime
The Act introduced amendments to the Petroleum Profit Tax (PPT) regime to address issues relating to base erosion and profit shifting in the oil and gas sector. These amendments aim to strengthen tax compliance in the industry and ensure that petroleum companies contribute their fair share of taxes to the Nigerian economy.
5. Review of Capital Gains Tax (CGT) Provisions
The Finance Act 2021 reviewed the CGT provisions, amending the timeline for disposing of assets without incurring CGT liabilities. The Act extended the CGT window from two years to four years, providing investors with more flexibility in managing their asset portfolios and aligning with global practices.
The Nigeria Finance Act of 2021 introduces critical changes to the nation’s tax landscape, aimed at fostering economic growth, simplifying tax compliance, and ensuring fiscal sustainability. The amendments to the VAT regime provide relief to vulnerable populations and ease the compliance burden for small businesses, encouraging entrepreneurship and business expansion. The excise duty on telecommunications services diversifies revenue sources and addresses growing sectors of the economy.
As a trusted accounting firm in Nigeria, we remain committed to guiding businesses and individuals in understanding and implementing the changes brought about by the Nigeria Finance Act 2021. Our expertise in tax advisory and compliance enables our clients to navigate the evolving tax landscape efficiently while maximizing available opportunities.
The Finance Act 2021 reinforces Nigeria’s commitment to creating a conducive business environment, attracting investments, and fostering economic development. By embracing these changes, businesses and taxpayers can contribute to the nation’s progress and prosperity. Let us work together to build a vibrant and sustainable economic future for Nigeria.
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.