The Finance Bill 2022 amends relevant tax, excise and duty statutes and is currently undergoing legislative consideration and review.
The Finance Bill seeks to provide the following:
- Enhance Tax Equity by bringing more economic sectors into the tax net and ensuring a fairer distribution of revenue receipts to all tiers of Government;
- Respond to Climate Change challenges through incentives to support the utilisation of gas as a transition fuel, as well as disincentives for gas flaring and venting;
- Support Job Creation through sustained Economic Growth, in partnership with key international developmental and other agencies;
- Implement fundamental corporate tax incentives’ reforms;
- Enhance Revenue Generation and Tax Administration through various fiscal and other measures.
Key Changes in the Bill includes:
- Section 3 CGTA: Taxation of Cryptocurrency and other digital assets at 10%.
- Section 5 CGTA: Losses accruing to a person on the disposal of any asset shall now be deductible from the gains accruing to the person.
- Section 15 CITA: Taxation of lottery and gaming business.
- Section 26 CITA: Medium and large companies engaged in commercial winning, capture, production and utilisation of associated and non-associated gas shall be allowed a single fifty percent investment tax credit on their Qualifying Capital Expenditure for that purpose.
- Section 32 CITA: Reconstruction Investment Allowance is deleted but without prejudice to any pre-existing rights relating to any QCE acquired on or before 31st December, 2022 provided that a company that has incurred QCE on or before the effective date of this repeal shall continue to enjoy the allowance under this section until it is fully utilised.
- Section 34 CITA: Rural Investment Allowance is deleted but without prejudice to any pre-existing rights relating to any QCE acquired on or before 31st December, 2022 provided that a company that has incurred QCE on or before the effective date of this repeal shall continue to enjoy the allowance under this section until it is fully utilised.
- Section 40 CITA: Taxation of Gas-flaring Company at the rate of 50 kobo per Naira (50%).
- Section 21 CITA: All services, including but not limited to telecommunication services provided in Nigeria shall be charged with excise duties at a rate prescribed in the presidential order.
- Section 37 CITA: The 25% tax exemption from CIT granted on income in convertible currencies derived from tourists by a hotel is to be repealed.
- Section 89 SDA: the distribution of revenue from electronic money transfer on the basis of derivation is now 15% (Federal), 50% (State), 35% (Local).
- Section 33 PITA: Any amount paid as premium by an individual during the preceding year of assessment in respect of own life or the life of a spouse, or contract for a deferred annuity will be tax deductible provided that any portion of a deferred annuity withdrawn within 5 years of paying the premium will be taxed at the point of withdrawal.
- Section 7 (4b) VATA: Introduction of general anti-avoidance transfer pricing rules to counteract any artificial arrangement in respect of transactions between connected persons for VAT purposes.
- Section 16 (4) VATA: An importer of goods purchased online, from a non-resident supplier who has been appointed by the FIRS to charge and collect VAT, is required to provide proof of such appointment and VAT charged on the invoice as a condition for clearing the goods without further VAT.
- The Bill indicates a commencement date of 1st January 2022 (which is either an error or intentional retrospective application), or such other date as may be specified by the National Assembly or the President by assent or order.
However, there has been an update on the Finance Bill with the following key changes:
- Increase in Tertiary Education Tax (TET) rate from 2.5% to 3%.
- Change in the name of the FIRS to Nigeria Revenue Service and separation of the Board from the Service with the latter to be headed by a Commissioner General.
- Deletion of the proposed taxation of Gaming and Lottery businesses under the CITA.
- Capital losses deductible for CGT purposes may be carried forward for a maximum of 5 years.
- The proposed 50% Investment Tax Credit for investment in gas utilisation has been changed to investment allowance of 10% and 5% per annum for non-associated and associated gas respectively subject to attaining a cumulative production of 300 billion cubic feet.
- Exemption of companies engaged in upstream and midstream gas operations (along with Agro Allied businesses and manufacturing companies) from the annual restriction of capital allowance utilisation to 2/3rd of assessable profits.
- Commencement date of the Bill changed from 1st January 2022 to 1st January 2023.