Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, has said that small and medium enterprises (SMEs) with a turnover of N25 million and below will no longer pay company income tax (CIT) once President Muhammadu Buhari signs the 2019 Finance Bill.
The 2019 Finance Bill will ensure the exemption of small businesses with an annual turnover of less than N25 million from Company Income Tax.
However, since the Bill was passed by the National Assembly in November 2019, Buhari has not signed it even though he signed the 2020 Appropriation Bill that was passed later.
Ahmed who spoke in Abuja, on Monday, said only companies doing a turnover of over N100 million will henceforth pay 30 per cent CIT while those with a turnover of between N25 million and N100 million annually will pay 20 per cent.
“Our assessment is that any business that has a turnover of less than N25m needs that break, not being taxed so they can invest in their businesses. And we reduced the tax for medium-size businesses from 30 per cent to 20 per cent so they can have more resources that they can plough back in their business.
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“These are the largest employers of labour.
“The federal and state governments have a total labour force of less than one per cent of the population.
“Not only will small businesses be able to do more because they are not paying taxes, but we are also working together with the trade authorities to also encourage people in the informal sector to become formalised because they will see other businesses like them that are not registered doing well.
“Their productivity will increase, they will employ more Nigerians and at the end of the day, they will grow to the level of a medium-size business and begin to pay revenue,” Ahmed said.
The Bill also requires banks to obtain tax identification number (TIN) from corporate customers as a pre-condition for opening or maintaining bank accounts.
The Minister had said that the Bill has about 83 modifications.
The Bill also proposed modification of the Stamp Duty Act, which increased the threshold for collection of N50 on every N1,000 transaction to N10,000 while also expanding the definition of receipt to cover electronic transactions.
It amended the Customs and Excise Tariffs etc. (Consolidation) Act (CETCA) such that once assented, excise duties will now be paid on goods imported to Nigeria as opposed to a situation where many companies relocated to neighbouring countries and avoided such obligations.
The Bill also proposed to expand the scope and rate of value-added tax (VAT).
Henceforth, consumers will pay 7.5 per cent VAT on goods and services instead of the current five per cent.
Likewise, the Bill proposes to redefine the words “goods” and “services” in the VAT Act in such a way to include dividend payment.
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