THE FINANCE ACT OF 2021: NEW TAXES FOR BUSINESSES
Introduction
On the 31st of December, 2021, Nigeria’s President, Muhammadu Buhari, signed the 2021 Finance Bill [which is now Finance Act 2021] into law. The Finance Act 2021 [hereinafter referred to as “the Act”], came with changes to the Nigerian taxation sphere and also touched on regulations. Through the Act, provisions in other legislations such as Capital Gains Tax Act, Personal Income Tax Act, Tertiary Education Trust Fund Act, Companies Income Tax Act, etc. were also amended. These changes consequently have effects on the running of business operations in Nigeria. Some of them include:1. Companies Income Tax [CIT]
Before the advent of the 2021 Act, organizations which were involved in educational activities enjoyed exemption from taxation. Now, by virtue of Section 7 of the Act, such companies are subject to Capital Income Tax [CIT].
2. Tertiary Education Tax Rate
The previous rate for the Tertiary Education Tax was capped at 2% on the assessable profit of companies registered in Nigeria; But according to Sections 28 & 29 of the Act, this has been increased to 2.5%. However, this tax does not apply to small businesses. Also, within 30 days of receiving a notice of assessment from the FIRS, any company subject to Tertiary Education Tax must pay within 30 instead of the 60 days which was obtainable under the previous dispensation.
3. Sugar Tax
The Act also amended the Customs, Excise Tariffs, Act [CETA] through the introduction of the so-called “Sugar Tax” in Section 21(3), CETA. This new provision imposes an excise duty of N10 per litre on non-alcoholic, carbonated and sweetened beverages. A rationale behind it is to discourage excessive consumption of sugar in beverages and drinks. This definitely, would have a rippling effect on companies manufacturing such beverages as they would be forced to increase the price of selling their products and consumers will bear the resulting brunt.
4. Capital Gains Tax
Previously, the Capital Gains Tax Act [CGTA], provided that capital gains which accrue to a person from the sale of shares or stocks could not be charged. However, as a result of Section 2 of the Act which amends Section 30 of the CGTA, now there is an imposition of Capital Gains Tax on gains earned from disposal of shares. This however has a certain financial threshold of N100 Million and other conditions which must be considered.
Conclusion
The Finance Act of 2021 has amended quite a number of statutes with the aim of making sure new taxes are now imposed on certain kind of transactions and business owners have no choice but to adapt to these modifications. As gleaned from the above, the new legislation may not necessarily be bringing good tidings for some businessmen. This is obviously due to the new taxes and duties levied on transactions which was not the case under the old dispensation.
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