The Nigerian government has finally passed its Finance Bill into Law. President Muhammadu Buhari has signed the bill into law alongside the submission of the 2020 budget to the National Assembly. He announced this on Monday, 13 January 2020, via his Twitter handle.
We introduced the Bill alongside the 2020 Budget, to:
-Reform Nigeria’s tax laws to align with global best practices;
-Support MSMEs in line with our Ease of Doing Business Reforms;
-Incentivize investments in infrastructure and capital markets;
-Raise Government revenues.
— Muhammadu Buhari (@MBuhari) January 13, 2020
According to the bill, early-stage startups with less than N25 million revenue are no longer required to pay Company Income Tax (CIT). Medium-sized enterprises with revenues between N25 million and N100 million will have to pay N20% CIT while large businesses with revenues above $100 million pay 30% CIT. All companies making up to N25 million annually are now mandated to pay taxes, including tech startups.
The Nigerian government passed the Finance Bill into law to support SMEs and increase government revenue. It encourages and incentivizes investment in the capital market for early-stage startups. Shareholders may be encouraged to invest more in early-stage startups since the non-payment leverage will give them room to grow.
Besides the company income tax, the Nigerian government also increased the Value-added Tax (VAT) for online transactions from 5% to 7.5%. Furthermore, anyone who intends to operate a bank account is required to have a Tax Identification Number (TIN). This will be used to identify individual bank account and ensure that every citizen complies with the new tax policy.
Last year, the Federal Inland Revenue Service (FIRS) plans to charge 5% VAT on online transactions from 2020. Many Nigerians raised concerns regarding the implications of the tax on the digital economy. If implemented, this could dissuade e-commerce activities in the country.
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