Tax & Business Matters - Nigeria

PwC's Executive Session and Insights Series on Nigeria's Finance Bill 2019

In order to consolidate the macroeconomic effects on the economy and to help reduce budget deficits, President Muhammadu Buhari submitted a Finance Bill to the National Assembly, to amend various tax laws in Nigeria. The Bill has the following strategic objectives:

• Promoting fiscal equity;
• Reforming domestic tax laws to align with global best practices;
• Introducing tax incentives for investments in infrastructure and capital markets;
• Supporting MSMEs; and
• Raising revenues for government.

On Tuesday 26 November 2019, PwC Nigeria hosted over 200 business leaders with the Honourable Minister for Finance, Budget & National Planning in attendance to discuss salient issues contained in the Bill (see copy of presentation below).

In addition, we have analysed the impact and implications in our interactive Insights Series publication below with specific focus on:

1. Overview and general implications;
2. Implications for the Banking sector and Capital Market;
3. Implications for the Insurance Industry;
4. Implications for the Energy and Utilities Sector;
5. Implications for the Consumer and Industrial Products Industry;
6. Implications for Micro, Small and Medium-sized Enterprises;
7. Implications for Real Estate Investment Companies; and
8. Implications for the Digital Economy.

Also watch Taiwo Oyedele’s interview on Channels TV on Wednesday 27 November 2019 to discuss what’s in the Bill for everyone.

Finance Bill Insights Series

Taiwo's interview

Download PwC's Executive Session on Finance Bill_Presentation by Taiwo Oyedele

Tax Appeal Tribunal issues controversial judgement regarding VAT on exported services

A Nigerian subsidiary of a South African entity entered into an agreement to provide marketing services in Nigeria to promoted the “Fund” of the South African entity.

The issue in contention was whether or not the marketing services provided by the Nigerian entity qualify as exported services that are exempt from VAT.

The VAT Act defines exported services as those “performed by a Nigerian resident or a Nigerian company to a person outside Nigeria.”

The TAT ruled that the marketing services are liable to VAT in Nigeria on the basis that the services were performed to Nigerian customers, for and on behalf of the foreign entity. The TAT mentioned that the basis for charging VAT in cross-border transactions is “where the service was performed and not the location of the consumer”. Therefore, since the services were performed in Nigeria, such services were not exported and should be subject to VAT. 

This judgement raises important questions:

1. Are marketing services for the benefit of the customers or the seller?
2. Do people rendering a service to a non-resident have to be exported for the services to qualify as exported services?
3. On the flip side, does this not contradict the ruling of the court on the applicability of VAT on imported services?

Read our alert for further insights.
Download Tax Appeal Tribunal (TAT) issues controversial judgment on exported services

 

PwC's mobile app - Tax247 gives you access to tax resources on the go!

Finding tax information can be daunting, and trying to find out if the information is reliable is even a bigger challenge.

Well, help is here - PwC Nigeria's mobile app Tax247 gives you quick and reliable access to over 60 tax laws, decided cases, tax circulars, tax calculator, daily news and much more.

Click here to download Tax247 for iOS or Android and watch our "how to" video here.

2019 Finance Bill: Sweeping changes to Nigeria's tax laws underway!

A Bill to amend various tax laws in Nigeria is currently undergoing legislative process at the National Assembly. The 2019 Finance Bill which was presented to the Legislature by President Muhammadu Buhari along with the 2019 Budget seeks to introduce sweeping changes.

Below are some of the important changes you should know about:

1. Excess dividend tax to apply only to untaxed distributions other than profits specifically exempted from tax and franked investment income
2. Small businesses with turnover less than N25m to be exempted from Companies Income Tax
3. A lower CIT rate of 20% to apply to medium-sized companies with turnover between N25m and N100m
4. Commencement and cessation rules modified to eliminate overlaps and gaps to avoid double taxation and complication during commencement
5. Minimum tax provisions amended to 0.5% of turnover and exemption only applies to small companies (less than 25m turnover), so non-resident companies will now pay minimum tax
6. Insurance companies can now carry forward tax losses indefinitely, deduct reserve for unexpired risks on time apportionment bases while special minimum tax for insurance has been abolished
7. Bonus of 2% of tax payable (medium-sized companies) and 1% for large companies for early payment of CIT
8. Introduction of thin capitalisation of 30% of EBITDA for interest deductibility. Any excess deduction can be carried forward for 5 years
9. Deemed tax presence for non-residents with respect to imported technical and management services now taxable at a final WHT rate of 10%
10. Any expense incurred to earn exempt income now specifically disallowed as a deduction against other taxable income
11. Dividend distributed from petroleum profits now to attract 10% withholding tax
12. Banks to request for Tax Identification Number (TIN) before opening business bank accounts for individuals, while existing account holders must provide their TIN to continue operating their accounts
13. Email correspondences to be recognised for communicating with tax authorities
14. The meaning of supply and definition of goods and services has been expanded to cover intangible items other than land, among others
15. Specific requirement for VAT deregistration for discontinuing operations
16. Introduction of VAT reverse charge on imported services
17. VAT registration threshold of N25 million turnover in a calendar year to be introduced
18. Remittance of VAT now to be on cash basis, that is, difference between output VAT collected and input VAT paid in the preceding month
19. Compensation for loss of employment below N10m to be exempted from CGT
20. Stamp duty on bank transfer to apply only on amount from N10,000 and above. Transfers between the same owner’s accounts in the same bank also to be exempted

Download FINANCE BILL 2019

A Bill to amend the Production Sharing Contract Act in the Petroleum Industry has been signed into law

President Muhammadu Buhari today signed into law, a Bill to amend the Deep Offshore (and Inland Basin Production Sharing Contract) Act [the PSC Act].

Production Sharing Contract (PSC) is a contractual arrangement for exploration and production of petroleum resources where the contractor undertakes all the financial, technical and operational risks associated with petroleum operation in return for a share of profit oil after payment of royalty, cost and tax oil.

The arrangement was introduced during the 1991 licensing round while the PSC Act became effective on 1 January 1993. The price of oil per barrel at the time was around US$13 per barrel. It was considered that certain incentives were necessary to encourage activities in the deep offshore which requires significant investment and technology. The special incentive regime includes:

• longer duration of oil prospecting licenses
• reduction in the petroleum profit tax rate 
• investment tax credit or investment tax allowance 
• lower royalty regime 

Section 16 of the PSC Act provides for the incentives to be reviewed where the price of oil exceeds US$20 per barrel or in any event after 15 years from inception and every 5 years thereafter.

The new amendment now introduces the following key changes:

1. Field based royalty rates of 10% for deep offshore (>200m water depth) and 7.5% for frontier/inland basin operation 
2. Introduction of incremental royalty rate based on the price of oil
3. Periodic review of the PSC arrangement every 8 years
4. Significant penalty for offences including imprisonment

The federal government estimates that the changes will generate about $500m in additional revenues for the government in 2020, and over $1bn from 2021. The changes are expected to take effect from fiscal year 2020.

Below is our alert and a copy of the Bill as passed by the National Assembly:

Download PwC Tax Alert_Changes to Deep Offshore Act_Nov2019

Download Deep-Offshore-and-Inland-Basin-Production-Sharing-Contract-Act-AmendmentBill-2019-as-Passed-by-the-Senate