Evidence of tax payment will be a
condition for operating a bank account from January, according to the Financial
bill passed by the National Assembly.
The Bill, submitted to the
lawmakers with Budget 2020 by President Muhammadu Buhari, is designed to
improve financial operations of the country and streamline the tax regime.
It is expected to be signed with
the budget before end of the month, to actualise the return to the January –
December budget cycle.
According to a section of the
Bill, banks will require anybody opening an account to provide his Tax
Identification Number (TIN)
Those who already have accounts
with banks will also be required to provide their TIN.
There are 30 million Bank
Verification Numbers (BVN)-linked accounts.
The intention is to make sure
that more people are captured into the tax net.
According to the Joint Tax Board,
the tax identification number (TIN) is a unique identifier for an individual or
a company for tax remittance.
The TIN is prepared by the tax
office and issued for proper identification and verification.
Applying for TIN is free. The TIN
generation process is real-time and should not exceed 48 hours after a request
is submitted.
Another major feature of the
Financial Bill is the hike in Value Added Tax (VAT) to 7.5 per cent from the
extant five per cent.
Also in the bill, emails will be
accepted by the tax authorities as a formal channel of correspondence with
taxpayers.
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The bill will also strategically
“promote fiscal equity by mitigating instances of regressive taxation; reform
domestic tax laws to align with global best practices; introduce tax incentives
for investments in infrastructure and capital markets; support small businesses
in line with the ongoing Ease of Doing Business Reforms; and raise revenues for
the Government by various fiscal measures.”
Under the proposed Personal
Income Tax Act: the bill will state that pension contributions no longer
require the approval of the Joint Tax Board (JTB) to be tax-deductible.
The bill when signed into law,
will remove the tax exemption on withdrawals from pension schemes except the
prescribed conditions are met.
The bill will come up with a
penalty for failure to deduct tax by agents appointed for tax deduction. This
penalty is 10 per cent of the tax not deducted, plus interest at the prevailing
monetary policy rate of the Central Bank of Nigeria (CBN).
The conditions attached to tax
exemption on gratuities will be removed by the bill, meaning that gratuities
are unconditionally tax exempt. The duties currently performed by the Joint Tax
Board (JTB) as it relates to administering the Personal Income Tax Act, will
now be performed by the FIRS.
Another penalty that will come
into effect when the bill becomes law will be the penalty for late filing of
the Value Added Tax (VAT) returns.
The penalty for failure to
register for VAT will be reviewed upwards to N50,000 for the first month of
default and N25,000 for each subsequent month of default.
The penalty for failure to notify
FIRS of change in company address will be reviewed upwards to N50,000 for the
first month of default and N25,000 for each subsequent month of default. This
penalty also covers failure to notify FIRS of permanent cessation of trade or
business.
Similar to the VAT amendment, the
bill is also introducing Capital Gains Tax (CGT) exemption on Group
reorganisations, subject to the following conditions being met.
They are:
- Assets are sold to a Nigerian company and is for the better organisation of the trade or business;
- The entities involved are within a recognised group 365 days before the transaction, and the relevant assets are not disposed earlier than 365 days after the transaction.
The current practice is that
companies send an approval request letter under CITA S29(9) to the FIRS, and
include a CGT exemption request. Currently, the CGT Act imposes CGT on
compensation for loss of employment above N10,000.
The bill seeks to expand the
coverage of this provision by renaming it “compensation for loss” and increase
the minimum threshold from N10,000 to N10 million.
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