This legal update provides a high-level summary of the changes made by the Finance Act 2023 which became effective as of May 1, 2023. Businesses are advised to consult with their legal advisors for professional guidance to ensure compliance with the new tax regime and make informed financial decisions.
1. Corporate Income Tax (CIT)
The key changes to the CIT regime are as follows:
(a) By virtue of the Finance Act 2023, shipping and air transport operators are now required to file income tax returns accompanied by detailed gross revenue statements for their Nigerian operations, rather than audited financial statements.
(b) Regulatory agencies in the shipping and air transport industries are mandated to request evidence of income tax filings and Tax Clearance Certificates (TCCs) from companies seeking licenses and permits.
(c) The Finance Act 2023 eliminates the previously available 10% investment allowance provided for in sections 32 and 34 of the Companies Income Tax Act (CITA)., with the effect that companies can no longer claim the additional investment allowance on qualifying expenditure incurred on plants and equipment.
2. Tertiary Education Tax (TET)
(a) By virtue of the Finance Act, the rate of tertiary education tax is increased from 2.5% to 3%.
3. Customs and Excise Duties (CED)
The key changes to CED are as follows:
(a) By virtue of the Finance Act 2023, a new import levy of 0.5% is imposed on eligible goods imported into Nigeria from outside Africa. The proceeds from this levy will be utilised for capital contributions and other financial obligations designated for financial and multilateral institutions in Nigeria.
(b) Excise duty is now applicable to all services, including telecommunication services, at rates determined by the President.
4. Capital Gains Tax (CGT)
The key changes to the CGT regime are as follows:
(a) The FinanceAct 2023 introduces an extended period for carrying forward losses incurred from the disposal of assets. Taxpayers can now carry forward losses for up to five years if the total capital losses exceed the capital profit.
(b) Digital assets, including cryptocurrencies and non-fungible tokens, are now considered chargeable assets subject to capital gains tax. Gains from the disposal of digital assets, whether in Nigeria or elsewhere, are now liable for capital gains tax.
(c) The Act introduces roll-over relief for stocks and shares, allowing the reinvestment of proceeds from qualifying disposals into eligible shares of the same or other Nigerian companies within the same assessment year.
5. Personal Income Tax (PIT)
The key change to the PPT regime is as follows:
(a) Tax relief is reinstated for amounts paid as premiums on deferred annuity and personal or spouse’s life insurance. However, withdrawals of deferred annuity payments within five years are subject to taxation at the time of withdrawal.
6. Petroleum Profits Tax (PPT)
The key changes to the PPT are as follows:
(a) Rents incurred for disturbances on land and buildings are no longer deductible amounts, but contributions to Decommissioning and Abandonment (D&A) funds can be deducted for petroleum profits tax purposes.
(b) The Finance Act 2023 aligns the calculation of chargeable oil with the provisions of the Petroleum Industry Act of 2021.
(c) The Finance Act 2023 increases the penalties for non-compliance with the extant Petroleum Profits Tax Act to improve taxpayers’ compliance.
7. Value Added Tax (VAT)
The key changes to the VAT regime are as follows:
(a) The timeline for VAT remittance is shortened from the 21st to the 14th day of the following month.
(b) Importers of taxable goods and services purchased electronically from non-resident suppliers are required to provide proof of registration to prevent double taxation.
(c) A new definition of “building” is introduced, excluding easily removable fixtures or structures from the VAT exemption on buildings.
(d) General anti-avoidance provisions empower the Federal Inland Revenue Service (FIRS) to disregard transactions aimed at reducing taxable amounts.
The foregoing insight is not intended to constitute legal advice and is not prepared with a specific context in mind. Kindly seek professional advice specific to your situation. You may also reach out to your usual Balogun Harold contact or via support@balogunharold.com for support.
