Let’s talk about this brouhaha on an imminent cumbersome fiscal regime for Nigeria in 2020. Better still, call it the fear of the unknown, signaled by the warning to individuals, corporations and foreign investors to regularize their tax standing with the relevant tax authorities on or before the passage into law of the renown Finance Bill, 2019 (hereafter referred to as “the Bill”).
On 14 October, 2019 the Presidency in Nigeria sent the Bill to the country’s legislative chambers for passage and enactment into law. This 54-section executive-sponsored Bill, in the belief of the Presidency, is to promote fiscal equity, throw some incentives at infrastructure and capital market investors and make necessary incremental charges. How well so is to be left for time.
Major areas of Nigeria’s tax laws were affected including individual and corporate income taxes, petroleum profit tax, capital gains tax, value added tax (VAT), customs and excise duties and stamp duty. Each of these falls under direct or indirect taxes. The point of great concentration for the Bill was on company income tax and VAT. These will be considered in subsequent editions of this blog. However, let’s consider other equally important aspect of this Bill today.
The Finance Bill, 2019 proposes incremental, but necessary, changes to Nigeria’s tax and fiscal laws. Muhammadu Buhari, GCFR
Personal Income Tax
An important clarification that need be made about personal income tax is that it applies to enterprises and not just individuals alone. So in the eye of the law, a partnership or sole proprietorship is not a corporate person to be charged company income tax. What this also means is that an individual’s earning under a business name must be clearly delineated from his non-taxable wealth or assets.
Moreover, for taxable income, the law appreciates that the tax payer had to borne certain outgoings and expenses to actualize the income. Some of such outgoings and expenses are permitted to be deducted before the actual sum taxable can be ascertained. A contribution to a pension, provident or other retirement benefits fund, society or scheme is one of such deduction, albeit requiring approval by the tax authority, prior to the proposed alteration to Section 20, PITA.
After being assessed, a tax payer reserves the right to challenge what they perceive to be an unfair assessment. Prior to the Bill, such objections could be made to the tax authority in writing. The Bill now creates options for a tax payer to deliver such protest either by hand, through courier or via email.
Section 49, PITA was amended introducing a new subsection that obligates banks to extract Tax Identification Number (TIN) from new and existing customers who maintain a business account with the bank. Individuals are assured that nobody will block their accounts for failure to supply a TIN, except if such accounts are for business operations such as a sole proprietorship or partnership.
We will be taking a look at other vital aspects of the Bill in the next edition of our blog on taxation. This blog was contributed by Jude Akpevweoghene Daniel, a member of the Chartered Institute of Taxation, Nigeria and Partner at Oceanic LP.