FINANCE ACT, 2019 | Policy.ng

An Act amends key tax laws to widen the tax base and improve business ease. It targets companies and individuals to raise revenue and encourage investment in Nigeria.

FINANCE ACT, 2019

What Is This Policy?

Nigeria's first Finance Act, signed in January 2020 to accompany the 2020 budget, amending seven major tax laws to provide fiscal stimulus, widen the tax base, and improve the ease of doing business.

Who Does It Target?

Micro, small, and medium enterprises (MSMEs) All companies and individuals liable to tax in Nigeria Banks and financial institutions Real estate investment trusts (REITs) and investment funds

What Does It Aim to Achieve?

Raise government revenue, reduce the burden on small businesses, encourage investment, align Nigeria's tax laws with international standards, and support the 2020 budget.

Key Features

VAT Rate Increase: Increased the Value Added Tax rate from 5% to 7.5%. MSME Tax Relief: Exempts small companies (turnover below N25 million) from Companies Income Tax; reduces CIT for medium companies. Digital Economy Taxation: Extends Companies Income Tax to non-resident companies providing digital services to Nigerian users. Exemptions for Pension and Venture Capital: Grants tax exemptions for venture capital gains and pension fund income to encourage investment.

Current Status

Rollout Stage: Active - FIRS has issued implementation guidance Coverage: All taxable persons and entities in Nigeria Beneficiaries: MSMEs; government revenue; investment sector Funding: Revenue measure

How to Access

All taxpayers must update their compliance for changes in applicable rates MSMEs: file returns demonstrating exemption eligibility Businesses must charge and remit 7.5% VAT on taxable supplies Application method: Tax compliance: engage the Federal Inland Revenue Service (FIRS).

Important Terms

VAT rate is 7.5% from 1 February 2020 Small companies (below N25m turnover) are CIT-exempt but must still file returns Retrospective application provisions apply to some amendments

Impact & Metrics

Increased VAT revenue; registered MSME exemptions; enabled digital economy taxation framework.

Official Resources

Website: https://www.firs.gov.ng Contact: Federal Inland Revenue Service (FIRS)

Legal Framework

The Finance Act 2019 amends seven major tax statutes including the Companies Income Tax Act, Personal Income Tax Act, Value Added Tax Act, Customs and Excise Tariff Act, and the Capital Gains Tax Act. It derives constitutional authority from Section 59 of the 1999 Constitution (appropriation bills and tax legislation). The Act aligns with IMF fiscal policy recommendations in Nigeria's 2019 Article IV consultation and the OECD BEPS Action Plan on digital economy taxation.