Policy and Tax Administration
- Federal Inland Revenue Service directs banks to deduct
stamp duties charges on Loans
In line with the directive of the Federal Inland Revenue Service (the "FIRS") to all banks, the banks have notified their customers in a notice issued on 2 May 2024, stating their obligation to henceforth deduct and remit 0.375% as stamp duties on all loans backed by legal mortgage, shares, debentures, or bonds. The charge will be applied on the value of the legal mortgage, shares, debentures or bonds. (the "Affected Loans") The deduction is to be made on the value of the loan.
This directive comes as part of the administrative powers of the FIRS to implement various tax laws including the Stamp Duties Act. The Affected Loans are loans which banks typically grant to individuals or corporates to buy a home with repayment terms and accrued interest. By this directive, a bank issuing the Affected Loans is now required to deduct and remit the stamp duty applicable.
- Proposed Tax Relief for Small Businesses
Mr Taiwo Oyedele, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms (the "Committee"), recently unveiled underway plans of the Committee to provide tax reliefs to small businesses in the informal sector which was published on the official site of the Committee.
Mr. Taiwo Oyedele announced that the FGN will offer significant tax relief to 95% for small businesses in the informal sector. Businesses earning NGN25,000,000 (Twenty-Five Million Naira) or less annually will be exempt from various taxes that have previously hindered their progress. The aim is to address the challenges of multiple taxation faced by small businesses at federal, state, and local levels.
Mr Taiwo Oyedele noted that the proposed tax reforms are targeted at the top 5%, the elite and the middle class. This proposed tax relief follows the proposed reintroduction of a telecom tax, which is part of efforts to secure a $750 million loan from the World Bank. The Committee is reportedly drafting key legislations to implement necessary changes to the fiscal policies and tax reforms in Nigeria.
- Clarification on Proposed VAT Reforms
Following several news reports suggesting that the Committee is proposing an increased VAT rate, Mr Taiwo Oyedele, via his LinkedIn page, made clarifications on the proposed reforms to the VAT administration in Nigeria and noted that the Committee is proposing several changes to the Value Added Tax.
Mr. Taiwo Oyedele assured the public that discussions are ongoing on reforming the VAT system to benefit both businesses and the public. The proposed reforms as clarified by Mr Taiwo Oyedele include:
- Grant of full input VAT credit for businesses to reduce their cost of doing business and minimise the strain on their cash flows.
- Removal of VAT on an expanded list of basic food, educational and healthcare items to protect the poor.
- Harmonization of all consumption taxes into one (VAT only) and adjust the revenue sharing formula in favour of states to address multiplicity of taxes.
- Removal of VAT on export of service and intellectual property to promote non oil exports.
- An increase of the threshold for VAT exemption for small businesses.
- Enhancing the VAT refund process to reduce the strain on working capital of businesses.
- Introduction of VAT fiscalisation and electronic invoicing.
- consequential upward adjustment to the VAT rate on items not exempted to avoid a significant drop in revenue.
Overall, the proposed reform is aimed at creating a less complex and more efficient tax system and balancing out revenue for both federal and state governments.
- President Bola Ahmed Tinubu Suspends implementation of
the Cybersecurity Levy
The Nigerian government has suspended the implementation of the Cybersecurity Levy (the "Levy"). The announcement was made following the issuance, by way of a circular, of an implementation guideline to all commercial, merchant, non-interest and payment service banks, financial institutions, mobile money operators and payment service providers on the collection and remittance of the National Cybersecurity Levy by the Central Bank of Nigeria (the "CBN").
The Levy, though recently publicized by the CBN, was imposed by the Cybersecurity Act, 2024 as amended, to raise funds for cybersecurity initiatives through a 0.5% deduction on electronic transactions to be paid into the National Cybersecurity Fund (NCF) under the administration of the Office of the National Security Adviser (ONSA).
Further to the suspension, the CBN via its Circular dated 17 May 2024 withdrew its earlier circular on the implementation of the cybersecurity levy.
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