On the 31st of December 2020, President Muhammadu Buhari GCFR assented to the then 2020 Finance Bill (now Finance Act 2020). The new Act, which has 1st January, 2021 as its commencement date introduces sweeping changes to the tax regime in the country with its over 80 amendments cutting across 14 Subsisting Laws. Significantly, the Act provides amendments to clarify some previously grey areas, address areas of possible non-taxation or double taxation as well as support the realization of the 2021 revenue projections, enhance the effectiveness of fiscal incentives and adopt suitable counter-cyclical fiscal policies.

The 14 tax and fiscal related legislation amended by the Act are1  Companies Income Tax Act (CITA), Personal Income Tax Act (PITA), Industrial Development (Income Tax Relief) Act (IDITRA), Companies and Allied Matters Act (CAMA), Capital Gains Tax Act (CGTA), Value Added Tax Act (VATA), Tertiary Education Trust Fund (Establishment etc.) Act, Customs and Excise Tariff, etc. [Consolidation] Act (CETA), Stamp Duties Act (SDA), Federal Inland Revenue Service (Establishment) Act (FIRSEA), Nigeria Export Processing Zones Act (NEPZA), Oil and Gas Export Free Zone Act (OGEFZA), Fiscal Responsibility Act (FRA), and Public Procurement Act (PPA).

Below is the highlight of some of the relevant changes introduced by the Finance Act 2020:

1. Encouragement of agriculture

To foster primary agricultural production, companies involved in agricultural trade or business are now exempted from tax, provided the moratorium is not less than 12 months and the rate of interest on the loan is not more than the base lending rate at the time the loan was granted, refinanced or otherwise restructured2. Similarly, small and medium-sized companies engaged in primary agriculture can now enjoy pioneer status and tax exemption for up to 6 years (4 years at first, then an additional 2 years subject to satisfactory performance)3.

2. Tax deductions and exemptions

Compensation for loss of office that is up to N10million is now exempted from Section 36 (2) Capital Gains Tax. However, tax due on the excess above N10m is to be deducted by the payer and remitted4.

In the same vein, cost of donation in cash or kind to a fund created by the government concerning any disaster or pandemic is now tax-deductible. Such tax deduction can, however, not exceed 10% of assessable profit after other allowable deductions have been made5.

Persons earning the minimum wage (which is N30,000 as at the date of writing this publication) or less from their employment are now exempted from personal income tax6.

3. Upward review of minimum tax

Minimum tax has been upwardly reviewed from 0.25 under the 2019 Act, to 0.5. However, for companies filing their returns for years of assessments due between 1st Jan 2020 and 31st Dec 2021, the minimum tax of 0.25% of gross turnover less franked investment income will still apply7.

4. Additional power of FIRS

The new Act grants the Federal Inland Revenue Service (FIRS) the prerogative to prescribe the form of accounts (other than audited financial statements) for small and medium-sized enterprises as defined by the Companies Income Tax Act8.

Non-resident companies that derive profit from or is taxable in Nigeria are forthwith required to file a tax return with the FIRS. However, for non-resident companies performing business activities in Nigeria, for whom Withholding tax constitutes final tax, this requirement will not apply9.

Companies which operate in Free Trade Zones are now required to file returns with the FIRS, to enjoy tax exemption10.

5. Provisions as to technology

The law is now characterized by flexibility as service of notice of assessment and objections under CITA may be done via courier service, email or other electronic means as may be directed by FIRS11. In the same vein, virtual hearing is also recognized as the Tax Appeal Tribunal is permitted to conduct its hearing remotely via virtual means, using such technology or application as may be necessary to ensure fair hearing12.

Also, the meaning of ‘stamp’ and ‘stamped’ has been extended to include an electronic acknowledgement for denoting any duty or fee.  ‘Instrument’ also includes electronic documents (Part VIII Finance Act)13.

6. Customs and Excise Tariff

Telecommunication services provided in Nigeria is now liable to excise duties under the Customs and Excise Tariff, Etc. (Consolidation) Act (CETA)14.

On the flip side, the import duty on cars has been reduced from 30% to 5%. For tractors, the reduction is from 35% to 5%, while mass transit vehicles and trucks now enjoy an import tax of 10% down from 35%15.

7. Value Added Tax (VAT)

When a non-resident person makes a taxable supply to Nigeria, such a person is now required to secure TIN, collect VAT on the supply and optionally appoint a Nigerian representative to carry out its obligations16.

Air travellers are no longer required to pay Value Added Tax (VAT) on their airline ticket purchases. Similarly, leasing or hiring of agricultural equipment for use in an agricultural setting are now excluded from VAT-able items17.

8. Removal of stamp duty charges on electronic bank transfers

Stamp duty charges no longer apply to electronic bank transfers. In its stead, what applies now is a N50 electronic bank transfer levy for electronic transfer deposits of N10,000 or more in an account with any bank or applicable financial institution. Revenue from this levy is to be shared based on derivation, with the Federal Government receiving 15% while the state government gets 85%18.

9. Additional duty of the Accountant General

The Accountant General of the Federation is required to open dedicated accounts for the different types of taxes, for payment of tax refunds to be administered by the FIRS and funded based on the annual budgets for tax refunds for each type of tax as approved by the National Assembly19.

10. Unclaimed dividends

The new Act establishes a Crisis Intervention Fund (CIF) of N500bn (or an amount approved by the National Assembly) as well as an Unclaimed Funds Trust Fund which is to serve as a sub-fund of the CIF20.

With the establishment of this fund, amounts in dormant accounts and unclaimed dividends of listed companies which have been outstanding for 6 years or more are to be transferred to the Unclaimed Dividends Trust Fund as special debt to the Federal Government and managed by the Debt Management Office (DMO). Such amount, along with its yield, is to nonetheless be available to the account owner or shareholder on-demand at any time21.


The regular update of this particular legislation is a laudable one (there was a Finance Act enacted in 2019) as it constantly seeks to remain in tandem with current happenings in the country as well as in line with global best practices. It is evident that the 2020 Finance Act is indeed an innovative piece of legislation with a plethora of tax incentives which individuals and corporate bodies can benefit from, particularly to ease the effect of the economic downturns which the country has faced in recent years.

Kindly share your thoughts in the comment section below.

1 Section 1, Finance Act 2020

 2 Section 6, Finance Act 2020

 3 Section 23, Finance Act 2020

 4 Section 4, Finance Act 2021

 5 Section 11, Finance Act 2020

 6 Section 30, Finance Act 2020

 7 Section 13, Finance Act 2020

 8 Section 15, Finance Act 2020

 9 Sections 16, Finance Act 2020

 10 Section 58, Finance Act 2020

 11 Section 18, Finance Act 2020

 12 Section 57, Finance Act 2020

 13 Section 46, Finance Act 2020

 14 Section 37, Finance Act 2020

 15 Section 38, Finance Act 2020

 16 Section 40, Finance Act 2020

 17 Section 45, Finance Act 2020

 18 Section 48, Finance Act 2020

 19 Section 50, Finance Act 2020

 20 Section 75 and 76, Finance Act 2020

 21 Section 77, Finance Act 2020

lawpavilion • February 3, 2021

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