Nigeria: Review of tax measures in Finance Act, 2021

The president on 31 December 2021 signed into law the Finance Act, 2021.

Tax measures in the Finance Act, 2021 include the following:

• Introduction of 10% rate for capital gains tax on gains from disposal of shares in any Nigerian company when the gross proceeds from such sales in any 12 consecutive months exceed ₦100million (except when the proceeds are reinvested in shares of the same or other Nigerian company within the same year of assessment). Gains from transfer of shares in a securities lending transaction regulated by the Securities and Exchange Commission (SEC) are exempt from capital gains tax.
• Specific provisions applicable to the authority of the Federal Inland Revenue Service (FIRS) to assess non-resident companies for companies income tax based on a fair and reasonable percentage of the turnover attributable to their Nigerian operations—a deemed profit basis. 
• A change to the companies income tax law to remove specific reference to income from educational activities. 
• There is a further extension of the period within which the minimum tax rate is reduced to 0.25%, for three reporting periods: 1 January 2019 through 31 December 2021. 
• A limitation of the amount of a capital allowance claimable by a company that earns both taxable and tax-exempt income when the tax-exempt income is greater than 20% of taxable income in any year of assessment.  
• Clarification of the conditions for claim of an incentive for downstream gas utilisation projects. 
• Resolution of the tax position of unit trusts and real estate investment trusts (REITS), to incentivize investment in such business structures that are currently serving as capital aggregation platforms under the SEC’s regulatory oversight.  Specifically, REITS and unit trusts will now operate as pass-through vehicles for tax purposes. 
• Increase of the tertiary education tax (TET) rate from 2% to 2.5% for Nigerian companies. 
• Introduction of excise tax on non-alcoholic, carbonated, and sweetened beverages at ₦10 per liter.
• Modification of the administrative provisions of the value added tax (VAT) law relating to business-to-customer (B2C) e-commerce transactions and authorizing the FIRS to appoint non-resident B2C service providers to act as agents for VAT collection purposes.
• A change to the individual (personal) income tax measures to exclude contracts for deferred life annuity from allowable deductions for tax computation purposes.
• Authority granted to the Minister of Finance to issue regulations, subject to the approval of the National Assembly, for auditing, accounting, allocation, and distribution of stamp tax and electronic money transfer (EMT) levies collected between 2015 and 2019 fiscal years. 
• Clarification of companies liable for a National Agency for Science and Engineering Infrastructure levy of 0.25% of profit before tax.  Affected companies include companies operating in the banking, mobile telecommunication, oil and gas, aviation, and maritime companies with turnover of ₦100 million and above.

Read a January 2022 report [PDF 306 KB] prepared by the KPMG member firm in Nigeria

Read also a February 2022 report [PDF 7.5 MB] prepared by the KPMG member firm in Nigeria