- Reduces import duty from 35 to 10 per cent, zero per cent levies on tractors, transport vehicles
The Federal Executive Council (FEC), presided over by President Muhammadu Buhari on Wednesday approved the Finance Bill 2020, aimed at supporting the 2021 Budget.
Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had confirmed the approval of the Finance Bill after the FEC meeting, explaining that the bill designed to bring about incremental changes in the nation’s tax laws.
And in a statement after the Council meeting, a statement from the Office of the Vice President said that the bill, which aims to further cushion current socio-economic conditions, is proposing more tax incentives including import duty reductions from 35 to 10 per cent and zero per cent levies on tractors, transport vehicles and other essential equipment and machinery.
In addition, there would be a 50 per cent reduction of minimum tax, specific TETFUND exemption and tax relief for contributions to the COVID-19 Relief Fund.
The bill also specifies that retirees’ compensation exemption threshold is to be raised from N10,000 to N10 million and software acquisition would now qualify as capital expenditure allowing for tax recovery of same.
According to the statement titled: FG PROVIDES ADDITIONAL RELIEFS FOR BUSINESSES, INDIVIDUALS IN PROPOSED FINANCE BILL 2020, “in its continued determination to cushion the socio-economic condition in the country even as the Economic Sustainability Plan (ESP) is in progress, the Buhari administration will be offering more tax incentives to Nigerians especially through the forthcoming 2020 Finance Bill.
Some highlights of the proposed bill include:
1. Reduction in duties on tractors from 35 to 10 per cent
2. Reduction in duties on motor vehicles for the transportation of goods from 35 to 10 per cent.
3. Reduction of levy on motor vehicles for the transportation of persons (cars) from 35 per cent to 5 per cent.
4. Exemption of small companies from payment of education tax under the Tertiary Education Trust fund (TETFUND)-companies with less than N25m turnover are eligible
5. 50 per cent reduction in minimum tax; from 0.5 per cent to 0.25 per cent for gross turnover for financial years ending between January 1st, 2020 and December 31st, 2021.
6. Granting of tax relief to companies that donated to the COVID-19 relief fund under the private sector coalition (CACOVID).
Minister of Finance, Budget and National Planning had said that the incremental changes referred to in the bill does not mean increasing taxes, but an improvement in the tax law, stressing that the country’s value added tax remains at 7.5 per cent.
According to Ahmed, “you recall that we did a Finance Bill in 2019, through these finance bills, what we are seeking to do is to make incremental changes to tax laws relating to customs excise as well as other fiscal laws, to support the implementation of annual budgets.”
“This is further expected to create more job opportunities in the automobile industry and stimulate economic growth,” the minister added.
The inclusion in the Finance Bill intended to grant tax relief to companies that donated to the COVID-19 relief fund is expected to serve as an acknowledgement and encouragement of such behavior.
Some of the principles underpinning the proposed fiscal and other reforms include:
a. Make incremental changes to tax, customs, excise, fiscal and other laws to support the 2021 Budget, for instance, by empowering the Federal Inland Revenue Service to automate its collection of tax returns and information from taxpayers within, and trading with the Nigerian Customs Area;
b. Providing fiscal relief for corporate taxpayers, for instance by reducing the applicable minimum tax rate for two (2) consecutive fiscal year (from 0.5% to 0.25%), reforming commencement and cessation rules for small businesses, as well as incentivizing mass transit by reviewing the duties and levies regime for the transportation sector, (particularly, targeting tractors, buses, trucks and other motor vehicles);
c. Proposing measures and interventions to fund the Government’s COVID-19 Crisis Intervention Initiatives as well as introducing provisions to allow for the recovery of donations made by corporate taxpayers towards the COVID-19 Pandemic and other potential crises;
d. Amending aspects of the Fiscal Responsibility Act 2007 to enhance fiscal efficiencies as well as to control the cost-to-revenue ratios of key State and Government-Owned Enterprises; and
e. Amending the Public Procurement Act to implement key procurement reforms previously proposed by the National Assembly to extend the Act to the judiciary and legislature, accelerate procurement processes and increase mobilization fee threshold.
The Finance Act 2019, which is the template for the proposed 2020 Bill, sets five strategic objectives, which include: raising government revenue through various fiscal measures, reforming domestic tax laws to align with global best practice, promoting fiscal equity by mitigating instances of regressive taxation, supporting small business entities in line with Ease of Business Reforms and introducing tax incentives for investments in infrastructure and capital market.