Tax & Business Matters - Nigeria

FIRS issues simplified VAT regime for non resident suppliers

Further to the Finance Act 2020, non-residents that make taxable supplies of goods and services to Nigerian customers are now required to register for VAT, include VAT on their invoices and file returns. This is even if they do not have any fixed connection with Nigeria.

The FIRS has subsequently issued a circular to simplify the VAT regime and ease the adoption of the new VAT requirements for non-residents. The circular would be effective from January 2022 for the supply of services and intangibles to Nigerian customers, and from January 2024 for the supply of goods.

Our Tax Alert highlights the key matters in the circular. 

Download PwC Tax Alert - FIRS issues simplified VAT regime for non-resident suppliers

Nigeria’s Ministry of Finance issues VAT (Modification) Order, 2021

The Ministry of Finance has issued a Value Added Tax (Modification) Order, 2021 with a commencement date of 30 July 2021. The Order revokes previous orders and modifies the list and definitions of exempt items under the VAT Act.

Some of the major changes are:

Exempt goods

• Petroleum products - this is restricted to aviation turbine kerosene premium motor spirit, household kerosene, locally produced Liquefied Petroleum Gas (LPG), and crude petroleum oils.
• Renewable energy equipment.
• Raw materials for the production of baby diapers and sanitary towels.
• Locally produced animal feeds.
• Gas supplied by gas producing companies to electricity generating companies (GENCOs), electricity generated by GENCOs and supplied to National Grid or Nigeria Bulk Electricity Trading Company (NBET) and electricity transmitted by Transmission Company of Nigeria (TCN) to electricity distribution companies (DISCOs).
• Agricultural seeds and seedlings.
• All locally produced veterinary medicine .
• Military hardware, arms, ammunition and locally manufactured uniforms used by the armed forces, paramilitary and other security agencies of governments in Nigeria

Exempt Services

• Previously, services rendered by Community Banks, People's Bank and Mortgage Institutions were VAT exempt. The Order replaces “Community Banks” and “People's Bank” with “Unit Microfinance banks”, defined as banks categorised by the Central Bank of Nigeria as Tier 1 or Tier 2 Unit Microfinance Banks.
• Shared passenger road transport services available for public use are VAT exempt. However, the Order excludes “leased, hired or rented motor vehicles or transportation apparatus for business or private use, or a car or ride hailing”.
• The exemption on air tickets sold by commercial airlines registered in Nigeria now specifically excludes hired or rented aircrafts or private jets. Also, private jets and their spare parts are VATable

Zero rated items

• ‘Non oil exports’ has been reclassified from the list of zero-rated items to exempt items.

Find out more in our Tax Alert below. We have also provided a link to the Value Added Tax (Modification) Order, 2021 for reference.

Download Nigeria’s Ministry of Finance issues VAT (Modification) Order 2021

Download VAT Modification Order 2021 

Insights on Nigeria's 2022 Budget of Economic Growth and Sustainability

Nigeria's President, Muhammadu Buhari presented the 2022 Budget on 7 October 2021, to the Joint Session of the National Assembly.

Insights

The 2022 budget has a deficit of about N6.25tn, approximately 3.39% of GDP. This is above the 3% ceiling set by the Fiscal responsibility Act 2007. However, the President stated that the expenditure level was necessary to assist with overcoming current security challenges and to accelerate post-recession growth. The deficit is expected to be financed by new borrowings, privatisation proceeds and drawdown on loans secured for specific projects.

The President indicated government's intention to strengthen Public Private Partnerships and to explore innovative approaches for sustainable infrastructure financing and improved revenues.

Find out more in our Budget Bulletin below:

Download PwC Bulletin_Nigeria's 2022 Budget Highlights

136 countries reach political agreement on a new international corporate tax framework

On October 8, 136 out of the 140 countries of the OECD Inclusive Framework (IF) on Base Erosion and Profit Shifting have politically committed to potentially fundamental changes to the international corporate tax system. The group of 136 includes some countries that had expressed reservations about the deal in July such as Ireland, Hungary, Estonia, Barbados and Peru, but have now committed to the agreement. Pakistan, which had signed up to the agreement in July, has now withdrawn its support for the agreement. The agreement allows for some optionality in terms of implementation of both constituent pillars.

Three other countries of the IF membership have not signed up to the agreement yet: Nigeria (the largest economy in Africa), Kenya (the fifth largest economy in Africa) and Sri Lanka. Cyprus, the only country in the EU 27) that is not a member of the IF, has previously indicated opposition.

Pillar One and Two will introduce two very new and very considerable sets of changes to the international corporate tax system. The application of Pillar One to the above-normal profit of less than 100 corporate groups means that many MNEs will not be in scope.

Nonetheless, the focus of the Pillar on allocating more profit to markets and on using a formula has the potential to change the approach and expectations of tax authorities around the world for all taxpayers, which may be reflected more broadly on audit.

Pillar Two has a much broader application and many MNEs will have to comply with it and line up the resources to calculate the ETR across many jurisdictions, using a mix of accounting and tax rules.

Find out more in our Tax Policy Alert below:

Download PwC Tax Policy Alert_Pillars 1&2 Tax Framework_Oct2021

The Tax Appeal Tribunal (Procedure) Rules 2021

The Honorable Minister for Finance, Budget and National Planning recently issued new Tax Appeal Tribunal (Procedure) Rules 2021. The Rules were issued under Paragraph 21 of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act, 2007. The Rules replace the 2010 Rules and are intended to guide the practice and procedure of Tax Appeal Tribunal (TAT) proceedings.

The key provisions include:

1. Electronic filing [Order 3 Rule 5] and service [Order 7 Rule 5]
2. Virtual hearing of applications [Order 11 Rule 4 and 17 Rule 9]
3. Place of filing appeals [Order 4 Rule 2]
4. Mandatory payment of 50% of tax assessed [Order 3 Rule 6]
5. Documents only procedure [Order 15]
6. Summary appeal procedure [Order 16]
7. Cost [Order 22]
8. Pre-trial conference [Order 17 Rule 2]

Download our alert and a copy of the Rules for more information.

Download PwC Tax Alert_TAT Procedure Rules 2021

Download TAT Procedure Rules 2021

 

Highlights of Nigeria's 2022 Budget Proposals

President Muhammadu Buhari today presented the 2022 Budget Proposals to the National Assembly tagged the Budget of Economic Growth and Sustainability.

Below are the highlights:

Other highlights:

• For 2021, actual revenues were 34% below target as at end of July
• Under recovery on petroleum products has been a major reason for decline in government revenue
• Revenue improvement is expected from government owned enterprises
• Projected revenue for 2022 includes revenues of 63 Government-Owned Enterprises
• 2022 deficit is to be financed through borrowing (N5.01 trillion), loan draw-down (N1.16 trillion) and Privatisation Proceed (N90.73 billion)
• Strategy to improve revenue include enhanced tax and excise revenues through policy reforms and review of tax waivers and concessions

Download FGN 2022 BUDGET SPEECH_OCT. 2021

Download FGN 2022 Appropriation Bill

Download 2022-2024 MTEF & FSP Final 07072021

Nigeria's Senate Passes Bill to Impose a New Tax on Companies for Tertiary Healthcare Development

A bill for the establishment of a Tertiary Healthcare/Hospitals Development Fund has been passed by the Nigerian Senate. The objective is to fund the rehabilitation, restoration and consolidation of tertiary healthcare in Nigeria.

Functions of the Fund include provision and maintenance of infrastructure essential for tertiary healthcare delivery, health research, clinical training, disbursement to various tertiary teaching hospitals in Nigeria, monitor and evaluate execution of projects in relation to the Fund.

The following are the sources of funds into the Fund as contained under section 10 of the Bill:

1. take off grant provided by the Federal Government
2. money appropriated by the National Assembly
3. one percent (1%) of petroleum companies tax paid on total barrels of crude oil produced yearly
4. one percent (1%) of mobile phone service providers tax paid on airtime and data sold yearly
5. one percent (1%) of beverages and breweries companies tax paid on profit yearly declared
6. one percent (1%) of cement companies on profit yearly declared
7. one percent (1%) of paint and chemical manufacturing companies tax paid on profit yearly declared; and
8. one percent (1%) of tobacco companies tax paid on profit yearly declared.

Download a copy of the Bill here: Download Tertiary Hospitals Development Fund Bill 2021