Nigeria's tax and regulatory landscape experienced significant changes in 2020 largely due to the implementation of the Finance Act, 2019 and the impact of COVID-19 pandemic. The pandemic affected almost every sector of the Nigerian economy, with the aviation, oil and gas, and hospitality sectors amongst the worst impacted by the pandemic. However, companies operating in the telecommunications industry and fast-moving consumer goods sector have been less impacted due to the essential nature of their services and products.

The oil and gas sector, which was projected to generate about 28% of Nigeria's revenue in the 2020 approved budget, experienced challenges during the year as a result of sustained decline in crude oil prices. This led the Federal Government (FG) to revise the 2020 budget and shift focus to non-oil sources to finance the revised budget. Consequently, the FG implemented several fiscal and monetary policies, in line with the economic realities of the time, to improve the economic decline caused by the twin impact of the pandemic and continued drop in crude oil price.

This publication provides a summary of the significant events that occurred in the Nigerian tax and regulatory space in 2020 and highlights the outlook for 2021 which should be anticipated by all stakeholders as the year unfolds.


Federal Tax Issues

1.1. Value Added Tax (Modification Order), 2020

The Honourable Minister of Finance, Budget and National Planning (HMoFBNP), Mrs. Zainab Shamsuna Ahmed, signed the Value Added Tax (Modification Order), 2020 ("the Order") pursuant to her powers under Section 38 of the Value Added Tax (VAT) Act, Cap. V1, Laws of the Federation of Nigeria, 2004 (as amended).

The Order, which commenced on 3 February 2020, modifies the First Schedule to the VAT Act by defining and expanding the list of goods and services exempted from VAT, and provides clarity on the interpretation of the VAT Act, as amended by Finance Act, 2019.

Click here to read our Newsletter on the order.

1.2. Companies Income Tax (Significant Economic Presence) Order 2020

The Federal Government of Nigeria published the Companies Income Tax (Significant Economic Presence) Order, 2020 ("the Order") in its Official Gazette No. 21, Vol 107 of 10 February 2020. The Order was signed by the HMoFBNP, pursuant to her powers under Section 13(4) of the Companies Income Tax Act, 2004 (as amended) (CITA), and commenced on 3 February 2020.

The Order provides guidance on the definition of significant economic presence (SEP) in relation to income earned by non-resident companies doing business in Nigeria, in line with the Section 13(2)(c) and (e) of CITA, as amended by Finance Act, 2019.

Please click here to read our Newsletter on the Order.

1.3. Companies and Allied Matters Act, 2020

In August 2020, His Excellency, President Muhammadu Buhari, GCFR, assented to the Companies and Allied Matters Act (CAMA), 2020. The Act repeals and replaces CAMA, 1990, and introduces measures to ensure efficiency in the registration and regulation of corporate entities, reduce the compliance burden of small and medium enterprises (SMEs), enhance transparency and stakeholders' engagement in corporate organizations and, overall, improve the ease of doing business in the country.

Some notable key changes introduced by the Act include: the provision for single-member/ shareholder companies, establishment of a framework for handling insolvency issues, minority shareholders protection and enhancement of corporate governance, provision for electronic filing, share transfer and e-meetings for private companies, reduction of filing fees for registration of charges, establishment of a framework for registration of limited liability partnerships and limited partnerships, amongst other innovative changes.

Please click here to read our Newsletter on CAMA, 2020.

1.4. Tax and economic measures in response to COVID-19 pandemic

The outbreak of the Covid-19 pandemic and its rapid spread across the world posed a new wave of disruption never seen before. The pandemic had and still has significant economic impact on government revenues and policies, business growth and sustainability, and survival of families and individuals across the world. This prompted the FG to introduce fiscal and economic stimulatory measures to ameliorate the impact of the pandemic on taxpayers and contend the decline in the nation's economic fortunes. Some of these measures include:

  • Waiver of penalties and interest on outstanding tax debts arising from desk reviews, tax audits and investigations.
  • Exemption of medical supplies from VAT and import duty.
  • Extension of the timeline for remittance of VAT from the 21st day to the last day of the month, following the month of deduction.
  • Approval for taxpayers facing challenges in sourcing foreign exchange (FOREX) to settle tax liabilities on their FOREX-denominated transactions to pay the Naira equivalent, based on the prevailing Investors & Exporters FOREX window rate on the day of payment.

Please click here to read our Newsletter on some of the tax economic measures introduced by Nigeria, and here to access KPMG Business Impact Series on COVID-19.

1.5. Implementation of the Finance Act, 2019

On 29 April 2020, following the President's assent to Finance Act 2019, the FIRS issued the following Information Circulars numbered 2020/02 - 08 containing its interpretation of some of the key amendments to tax laws by Finance Act 2019 and guidance on the implementation of the provisions of the amendments:

  1. Clarification on the Implementation of the VAT Provisions of the Finance Act, 2019;
  2. Circular on Tax Implications of the Operation of Regulated Securities Lending Transaction (SEC Lending) in Nigeria;
  3. Clarifications on Sundry provisions of the Finance Act 2019 as it relates to Companies Income Tax Act;
  4. Clarifications on the Provisions of the Stamp Duties Act;
  5. Clarification on Commencement and Cessation Rules, and Business Reorganisation: - Sections 29 of CITA, 32 of CGTA and 42 of VATA (as amended by the Finance Act, 2019);
  6. Circular on Tax Implications of Operation of Real Estate Investment Companies ("REIC") in Nigeria: and
  7. Clarification on the Amendment to Section 16 of CITA in Relation to Taxation of Insurance Companies

Please click here to read our newsletter and here to read our publication on the Circulars.

1.6. FIRS launched tax clearance certificate application portal

In 2020, the FIRS launched a new Tax Clearance Certificate (TCC) application portal, following the decommissioning of the old TCC application portal. According to the FIRS, the new portal is designed to be more robust and with additional functionalities to service taxpayers' needs.

Consequently, taxpayers were required to update their information with the FIRS to enable a smooth transition to the new portal, ease the processing of TCC applications from 2021 and have access to their receipts and credit notes.

Please click here to read our Tax Alert on the subject.

1.7. Transfer pricing e-filing portal

The FIRS in March 2020 launched an electronic transfer pricing (TP) filing portal named E-TP PLAT 2.0 to automate TP compliance. The E-TP PLAT 2.0 enables taxpayers to complete and file their TP compliance documentation, including TP Declaration and TP Disclosure forms, Country-by-Country notification forms and Country-by-Country report.

Please click here to access the E-TP PLAT 2.0

1.8. Reallocation of tax offices to companies in Lagos

The FIRS established a Large Tax Office (LTO) (Non-Oil) in Apapa, Lagos ("Apapa LTO") to cater to the following categories of taxpayers whose revenues exceed ?2 billion:

  • All domestic aviation companies in Lagos
  • All construction companies in Lagos
  • All domestic shipping companies in Lagos
  • All logistics, haulage and transportation companies in Lagos
  • All concessionaires at the Lagos ports

Consequently, the tax files of affected taxpayers were  reassigned to the Apapa LTO as their new tax liaison office, effective 15 May 2020.

Please click here to read our Tax Alert on the subject.

1.9. Finance Act, 2020

The His Excellency, President Muhammadu Buhari, GCFR, signed the Finance Bill, 2020 ("the Bill") into law on 31 December 2020, following its passage by the National Assembly. The Bill contains amendments to fourteen extant laws in Nigeria comprising: Companies Income Tax Act, Personal Income Tax Act, Custom and Excise Tariff Etc. (Consolidation) Act, Value Added Tax Act, Capital Gains Tax Act, Petroleum Profits Tax Act, Stamp Duties Act, Nigeria Export Processing Zones Act, Oil and Gas Export Free Zone Act, Industrial Development (Income Tax Relief) Act, Tertiary Education Trust Fund (Establishment) Act, Federal Inland Revenue Service (Establishment) Act, Fiscal Responsibility Act, Public Procurement Act, and Companies and Allied Matters Act.

Please click here to read our e-book on Finance Act, 2020: Impact Analysis.

1.10. Regularisation of the tax status of dormant companies

The FIRS issued a public notice requesting all dormant companies to regularise all their outstanding returns with the Service by 30 June 2020. In its public notice, the FIRS defined a dormant company as "a company that has informed the FIRS of its temporary cessation of business activities due to understandable exigencies for a minimum of one financial year".

The FIRS further stipulated sanctions for dormant companies who fail to comply with the directives, including delisting the defaulting company from the list of incorporated companies and placing a lien on its bank account(s).

Please click here to read our Tax Alert on the subject.

1.11. MOU signed by NCC and FIRS to ascertain VAT elements of Telcos' transactions

The Nigerian Communication Commission (NCC) signed a memorandum of understanding (MOU) with the FIRS to enable the FIRS to ascertain the accuracy and completeness of VAT and other taxes payable by telecommunications operators ("the Telcos").

According the press statement released by the NCC, the MOU is part of the inter-agency collaboration aimed at improving the transparency of business operations in Nigeria. Under the MOU, the FIRS will integrate its application programme interface technology with the systems of the Telcos for independent verification of VAT payable on qualifying transactions by the mobile network operators rather than rely solely on the Telcos' book of accounts.

Please click here to read our Tax Alert on the subject.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.