Finance Bill 2020 has been enacted into law by President Mohammadu Buhari on
December 31st 2020, taking
effect from
1st January 2021.
It has made over 80 amendments to 14 different laws following hot on the hills
of the Finance Act 2019 which came into force on
13th January 2020. The Act has made several reforms to
some tax and regulatory laws in the country; it has even included certain
incentives towards the recent COVID-19 pandemic. In this article, we will be
examining the significant changes the Act has made to various laws in Nigeria.

Changes to the Personal Income Tax Act

gross income for PAYE tax purposes.  Section
33 (2) of the PITA was substituted with the following:

the purposes of this section, “gross income” means income from all sources less
all non-taxable income, income on which no further tax is payable, tax-exempt
items listed in paragraph (2) of the Sixth Schedule and all allowable business
expenses and capital allowances”.

The idea behind this is to prevent a situation
where non-taxable income (such as reimbursable, employer’s contribution to
pension), franked investment income (such as dividend) and tax-exempt items are
considered in the computation of Consolidated Relief Allowance (CRA).


of life assurance premium tax relief. The newly re-introduced subsection 3 of
33 states:

shall be allowed a deduction of the annual amount of any premium paid by the
individual during the year preceding the year of assessment toany insurance
company in respect of insurance on his life or the life of his spouse, or of a
contract for a deferred annuity on his own life or the life of his spouse”.


The Act
also mandates that Schemes or Societies, to which contribution to a pension,
provident and retirement benefits fund is made to, should be recognized under
the Pension Reform Act.


Finance Act introduced a proviso to Section 37 of PITA which provides that
minimum tax under its section as provided for under the Sixth Schedule to this
Act shall not apply to a person in any year of assessment where such a person
earns the National Minimum Wage or less from such employment.

In other words, any individual earning
National Minimum Wage which is N360,000 annually or less is exempted from
payment of personal income tax.


of the concept of Significant Economic Presence (SEP) to Personal Income Tax.

Changes to the Companies Income Tax Act

tax for companies in respect of returns for years of assessments due between 1st
January 2020 and 31st December 2020 has been reduced from 0.5% to
0.25% of gross turnover less franked investment income.

may prescribe the form of accounts other than audited financial statements form
small and medium companies.

of notice of assessment and objections may be done by courier service, email or
other electronic means as may be directed by the FIRS in a notice. Tax Appeal
Tribunal may conduct its hearing remotely via virtual means, using such
technology or application as may be necessary to ensure fair hearing.

character for the purpose of tax exemption requires an organization or
institution to be registered in accordance with relevant laws in Nigeria and
does not distribute or share its profits in any manner to members or promoters.

companies operating in Free Trade Zones, exemption from taxes is subject to
compliance with tax filing and returns obligation to the FIRS under Section 55
(1) of CITA.

Changes to the Stamp Duties Act

introduction of a one-off levy of N50 known as the Electronic Money Transfer
Levy on electronic Money Transfer Levy on electronic transfers and deposits of
money in the sum of N10, 000 or more to replace the imposition of Stamp Duties
on such transfers. This levy is to be accounted for by the person to whom the
transfer or deposit is made and will be distributed between the Federal and
State Government on a derivation basis of 15% and 85% respectively.

Changes to the Federal Inland Revenue
Service Act

is a requirement for Federal Inland Revenue Service (FIRS) to utilize adhesive
stamp produced by the Nigerian Postal Service when denoting documents by
adhesive stamp.

for companies operating in the Free Trade Zones to file returns with the FIRS.

General for the Federation to open dedicated accounts for each tax type for the
payment of tax refunds to be administered by the FIRS and fund based on annual
budgets for tax refund for each tax-type as may be approved by the National

Changes to the Value Added Tax Act

of land and buildings, money and securities from the definition of goods and
services for VAT purposes.

non-resident that makes a taxable supply to Nigeria is required to register for
tax and obtain TIN, include VAT on its invoice, and may appoint a
representative in Nigeria for the purpose of its tax obligations.

of commercial airline ticket from VAT, and hire or lease of agricultural
equipment for agricultural purposes.

of land and buildings, money and securities from the definitions of goods and services
for VAT purposes.

Changes to the Capital Gains Tax Act

for loss of office up to N1 million exempted from Capital Gains Tax. Tax due on
excess above N10 million is to be deducted by the payer and remitted within the
time specified under the PAYE Regulations.

Changes to the Tertiary Education Trust
Fund Act

of small companies with less than BN25 million turn-over from payment of
Tertiary Education Tax.

Changes to the Industrial Development
(Income Tax Relief) Act

small or medium company engaged in primary agricultural production may be
granted pioneer status for an initial period of 4 years and an additional 2
years (making 6 years in total).

Customs & Excise Tariff
(Consolidation) Act

review of excise duty rates on tractors and motor vehicles for transportation
as well as duty-free importation of aircrafts and its parts for commercial
airlines in Nigeria.

of excise duty on telecommunication charges at a rate to be prescribed in the
law or an order issued by the President.

of import duty on tractors from 35% to 10% and reduction of import levy n cars
from 30% to 5%.

Changes to the Companies and Allied
Matters Act

 Unclaimed dividends ina listed company and
unutilized amounts in a dormant bank account outstanding for 6 years or more to
be transferred to the Unclaimed Funds Trust Fund as a special debt to the
Federal Government to be managed by the Debt Management Office and shall be
available to the shareholder or account holder at any time together with the
yield thereon.

of operating surplus of a corporation shall be paid to the CRF of the
Federation on a quarterly basis.

Changes due to the COVID -19 Pandemic

of donations made in cash or in kind to the government in respect of any
pandemic or natural disaster to a maximum of 10% of assessable profit after
other allowable donations.

conclusion, based on all the new amendments to the Finance Act, some of which
are actually geared towards meeting the demands of socio-economic changes, it
is advisable that both existing and prospective business owners should seek to
understand the provisions of the Finance Act and the implications on how
business is to be conducted in Nigeria going forward. In other words, since
every new law has its opportunities, as well as its challenges, it is expedient
that interested investors examine critically the impact of the amendments and
make the required adjustments needed, especially as regarding payroll tax



M. 2021, (January 6).  President Buhari
Signs the Finance Bill, 2020 into law. Andersen Tax.

W. 2021, January 6. President Signs the Appropriation Bill, 2021 and Finance
Bill, 2020.  Proshare.–2021-and-Finance-Bill–2020/55059

Key Changes in the New Finance Act, 2020 You Should Be Aware Of. (2021, January
6). Pwc Nigeria.

Act 2020 and its Impact on Employment Tax. (2021, January 6). Deloitte.



AOC Solicitors