Introduction

A major highlight of 2023 was the general election which ushered in a new government. Importantly, while as a final act, the outgoing government passed the Finance Bill 2023 into law, the incoming government, amidst uncertainties, made significant fiscal policies such as subsidy removal, setting up of the Fiscal Reform Committee and postponement of the commencement date of the Finance Act 2023 to September 2023. The year was primarily marked by political, legislative, and administrative changes aimed at establishing a more resilient and progressive fiscal system. These tax policies and administrative changes are likely to affect public perception of the Nigeria's tax system, influence business operations and decision-making, and the government's approach to revenue generation.

Notable legislative changes came with the enactment of the Finance Act 2023, which amended relevant tax and duty statutes to align with the Federal Government's macroeconomic policy reforms and the Business Facilitation Act 2023 (BFA), which introduced crucial amendments to existing tax legislations. The year witnessed the regulatory bodies leveraging technology and combining efforts to ensure a smooth tax administration. Of note, we saw the Federal Inland Revenue Service (FIRS or the Service) prioritizing the enhancement of tax revenue generation from unprecedented sources and the Nigerian judiciary, spearheaded by the Tax Appeal Tribunal (TAT), also played a crucial role in influencing the country's tax environment. The courts and tribunal continuously delivered judicial pronouncements with invaluable insights into the interpretation and application of tax laws, significantly influencing both taxpayers and tax authorities.

Our report examines the key developments in 2023 and presents an overview of the legislative changes, landmark judicial decisions, and administrative initiatives that have significantly influenced the tax environment for businesses. It provides an understanding of the evolving tax landscape in making a forecast for 2024.

1. The Business Facilitation Act:

On 13 February 2023, President Muhammadu Buhari signed the Business Facilitation (Miscellaneous Provision) Act into law (the "Act"). The objective of the Act is the elimination of critical bottlenecks and amendment of relevant laws to promote the ease of doing business in Nigeria. The Act amends salient provisions of certain laws including the: Companies and Allied Matters Act, Nigerian Export Promotion Act, Customs and Excise Management Act, Export (Prohibition) Act, Financial Reporting Council Act, Foreign Exchange (Monitoring and Miscellaneous) Act, National Office for Technology Acquisition and Promotion Act, Nigerian Investment Promotion Commission Act, and the Nigerian Oil and Gas Industry Content Development Act.

Under the Act, a single window platform was established to enable parties involved in trade and transport under the Customs and Excise Management Act to interface with each other and the authorities for purposes of fulfilling all import, export, transit related and regulatory requirements.

  • Only companies that have incurred a minimum capital expenditure of up to N5,000,000 are now required to obtain a Certificate of Acceptance of Fixed Asset for purposes of claiming capital allowance. This used to be N20,000.
  • Employees earning the national minimum wage and above in the private sector are not mandated to contribute 2.5% to the National Housing Fund.
  • Only employers with 25 or more workers in their establishment (except employers in the free trade zones) are now required to contribute one percent (1 %) of their annual payroll to the Industrial Training Fund (the Fund). Previously, the law required employers with 5 or more employees to contribute to the Fund. This reduces the burden on employers with less than 25 employees.

2. FINANCE ACT 2023 (FA 2023):

In line with the Federal Government's established practice of annually amending relevant provisions of various tax laws to bring them in in tandem with global best practices and generate revenue for government, the immediate past president, President Muhammadu Buhari signed the Finance Bill 2022 into law on 28 May 2023. The FA 2023 amends provisions of Nigeria's tax and fiscal legislation including the Capital Gains Tax Act, Companies Income Tax Act, Customs, Excise Tariff etc. (Consolidation) Act, Personal Income Tax Act, Petroleum Profits Tax Act, Stamp Duties Act, Value Added Tax Act, and the Ministry of Finance (Incorporated) Act.

Some highlights of the key changes introduced by the Act includes:

i. Amendments to the Capital Gains Tax Act (the "CGTA"):

  • Introduction of Digital Assets as Chargeable Assets under the CGTA1 : With the enactment of the FA 2023, the list of chargeable assets has been expanded to include digital assets. Accordingly, gains accruing from the disposal of digital assets such as cryptocurrency and NonFungible Tokens (NFTs) may be subject to the payment of Capital Gains Tax (CGT).
  • Deduction of Losses Arising from Sale of an Asset from the Gains Derived from the Sale of another Asset of the Same Class: Losses arising from the sale of a capital asset can now be deducted from gains derived from the sale of another capital asset, provided that the assets are in the same class. The unutilized losses can be carried forward for a maximum period of five years.

ii. Amendments to Companies Income Tax Act (the "CITA")

  • Introduction of Unrestricted Capital Allowances for Companies in the Upstream and Midstream Petroleum Industry: Prior to the enactment of the FA 2023, only agro-allied and manufacturing companies were allowed to claim 100% of capital allowance in respect of qualifying capital expenditure incurred by them in a particular year of assessment. Other companies were subject to a capital allowance claim of 66.6% or 2/3rd of their assessable profit in each year of assessment. However, with the enactment of the FA2023, companies engaged in upstream and midstream petroleum operations will now be able claim 100% capital allowance alongside agro-allied and manufacturing companies in each year of assessment.

To view the full article click here

Footnotes

1. the CGTA does not define digital assets. However, the Rules on Issuance, Offering Platforms and Custody of Digital Assets which was issued by the Securities and Exchange Commission defines digital assets as “a digital token that represents assets such as debt or equity claim on the issuer”. The definition may however be wider for tax purposes.

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.