Introduction

The Finance Act of 2023, a pivotal piece of legislation signed into law on 28 May 2023 by former President Muhammadu Buhari, heralds significant amendments across various tax and regulatory frameworks in Nigeria. With an effective date of 1 May 2023, this Act introduces a spectrum of modifications impacting the Capital Gains Tax Act, Companies Income Tax Act, Customs and Excise Tariffs, Personal Income Tax Act, Petroleum Profit Tax Act, Stamp Duties Act, Value Added Tax Act, and several others.

Let’s delve into the breakdown of these amendments and their implications for taxpayers and businesses alike.

Capital Gains Tax Act

• Digital Assets: The Act now recognizes digital assets as chargeable assets subject to a 10% capital gains tax on disposal.
• Capital Loss Carry-Forward: Taxpayers can carry forward capital losses for up to 5 years.
• Roll-Over Reliefs: Provision for roll-over reliefs on stock and shares sales with reinvestment in Nigerian companies within the same assessment year.

Companies Income Tax Act

• Investment Allowance Removal: The Act eliminates the 10% investment allowance on capital expenditure incurred on plant and equipment post-effective date.
• Rural Investment Allowance Removal: The Act scraps rural investment allowances on specific capital expenditures incurred after the effective date.
• Income Tax Exemption Revision: The exemption on tourist-related incomes in convertible currencies is adjusted, affecting hoteliers.

Customs, Excise, Tariff, etc. (Consolidation) Act

• New Levy: A 0.5% levy is imposed on eligible goods imported from outside Africa to finance obligations to international institutions.
• Excise Duty Expansion: The scope of services liable to excise duty is broadened to encompass telecommunications services.

Personal Income Tax (PIT) Act

• Deductions for Insurance Premiums: Premiums paid for life insurance or deferred annuity contracts are now deductible subject to a 5-year minimum holding period.

Petroleum Profit Tax Act (PPTA)

• Allowable Deductions: Contributions to decommissioning and abandonment funds are recognized as deductions.
• Additional Tax Determination: Amendments allow for referencing fiscal oil prices in determining additional tax payable.
• Compliance Measures: Stricter filing requirements and penalties for non-compliance are introduced.

Stamp Duties Act

• Revenue Allocation: Changes in revenue allocation from Electronic Money Transfer Levy collections are instituted.

Value Added Tax (VAT) Act

• Related Party Transactions: FIRS gains authority to assess VAT on related party transactions.
• Remittance Requirements: Timely remittance of VAT withheld or collected is mandated.
• Importation Clarification: VAT exemption for online goods from Non-Resident Suppliers is clarified.

Tertiary Education Trust Fund (Establishment) Act

• Tertiary Education Tax Increase: TET is raised from 2.5% to 3%.

Corrupt Practices and Other Related Offences Act

• Procurement Offences: Public officers face penalties for unauthorized procurement actions.

Public Procurement Act and Ministry of Finance (Incorporated) Act

• Procurement Guidelines: Public procurement must align with approved plans and budgetary provisions.
• Corporate Governance: The Ministry of Finance Incorporated gains enhanced governance structures.

Implications and Recommendations

The Finance Act, 2023 ushered in a new landscape of tax and regulatory norms, necessitating a thorough understanding among taxpayers and businesses. From revised tax rates to stringent compliance measures, each amendment carries implications that warrant professional guidance for optimal adaptation and compliance. As taxpayers navigate these changes, proactive engagement with tax consultants or legal advisors is advised to grasp the practical impact and seize potential benefits within the amended frameworks. In the ever-evolving tax ecosystem, informed strategies are paramount for seamless compliance and leveraging opportunities presented by the Finance Act, 2023.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.