Overview of the Nigeria Finance Act 2021: What You Need to Know.


The Nigeria Finance Act 2021 brought significant amendments to the tax laws and introduced various measures aimed at fostering economic growth, enhancing revenue generation, and improving the overall business environment. In this article, we provided an overview of the key provisions of the Nigeria Finance Act 2021 and its implications for businesses and individuals.

  • Digital Services Tax (DST):

The Finance Act 2021 introduced a Digital Services Tax (DST) on foreign companies providing digital services to Nigerian consumers. Companies with a significant economic presence in Nigeria are subject to a 2% tax on their gross income from specific digital services. This measure is aimed at ensuring that digital businesses contribute their fair share of taxes and aligns Nigeria with international efforts to tax digital transactions effectively.

  • Income Tax Exemption for Small Businesses:

To support the growth of small businesses, the Finance Act 2021 raised the threshold for companies eligible for income tax exemption. Businesses with annual gross turnover of N25 million or less are now exempt from paying income tax. This provision encourages entrepreneurship, fosters small business development, and supports economic diversification.

  • Expansion of VAT Exemptions:

The Act expanded the list of goods and services exempt from Value Added Tax (VAT). Educational materials, baby products, and pharmaceuticals are now VAT-exempt, benefiting consumers and reducing the tax burden on essential goods and services. However, this expansion may also impact businesses in these sectors in terms of input VAT recovery.

  • Pension Contributions:

The Finance Act 2021 clarified the tax treatment of pension contributions by removing the tax exemption on withdrawals from pension schemes for individuals who contribute above N10 million annually. This measure aims to encourage consistent contributions to pension schemes and enhance retirement savings.

  • Tertiary Education Trust Fund (TET Fund) Levy:

The Act introduced a 2.5% levy on the assessable profits of companies with annual turnover of N100 million and above. The proceeds of this levy will be channeled to the Tertiary Education Trust Fund, supporting the improvement of educational infrastructure and research in Nigerian tertiary institutions.

  • Capital Gains Tax (CGT) Exemption:

The Finance Act 2021 exempted compensation for loss of office from CGT. This measure is intended to ensure that employees who suffer job losses are not further burdened with capital gains tax liabilities on their severance packages.

  • Impact on Investment and Business Decision-Making:

The Nigeria Finance Act 2021 has implications for investment and business decision-making. Companies must consider the changes in taxation, exemptions, and levies when planning investments, expansions, and budgeting. Careful tax planning is crucial to optimize tax positions and comply with the new regulations.


The Nigeria Finance Act 2021 introduced significant changes to the tax landscape, impacting businesses and individuals across various sectors. As a leading accounting firm in Nigeria, we are dedicated to assisting our clients in understanding and navigating the implications of the Finance Act 2021. By staying informed and proactive, businesses can optimize their tax planning, ensure compliance with the regulations, and contribute to Nigeria’s economic growth and development. Our expertise and guidance empower businesses and individuals to make informed financial decisions and thrive in the evolving Nigerian tax environment.

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.