In early October 2024, President Bola Tinubu transmitted the Nigeria Tax Bill 2024 to the National Assembly.
The bill is expected to reshape Nigeria’s fiscal framework and establish a comprehensive legal framework governing taxation of incomes, transactions, and instruments.
The bill is entitled, “An Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks Relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions and Instruments, and for Related Matters.”
Since its transmission, the bill has sparked significant controversies and protests among Nigerians. Governors and traditional rulers of Northern Nigerian states convened on Monday and unanimously resolved to reject the bill. They said the contents of the proposed tax bill do not align with the interests of the North and other sub-national entities.
Here are some key provisions contained in the proposed bill:
Increment in VAT
Section 146 of the bill proposes to raise the value added tax (VAT) from 7.5 percent to 10 percent by 2025, with further increases to 12.5 percent from 2026 to 2029, and 15 percent from 2030 onwards.
The value of taxable supplies includes the total consideration plus VAT for monetary transactions or the market value for non-monetary transactions. In cases where the transaction is part of a larger arrangement, only the relevant portion will be taxable. For transactions between related parties or those involving non-monetary exchanges, the taxable value is determined by the equivalent market value.
Also, VAT collected by a taxable person will be called output VAT. Government bodies (federal, state, and local), their ministries, departments, agencies, and other designated agents are required to collect or withhold VAT and remit it to the tax authority as prescribed.
VAT Exemptions
The bill says that certain supplies will be exempt from the proposed VAT, including oil and gas exports, crude petroleum oil, and feed gas. Other exempt items include: goods purchased for humanitarian projects (where the donor pays VAT upfront), baby products, locally manufactured sanitary products, military hardware, arms, and ammunition supplied to security agencies.
Additionally, electricity generated by generation companies (GENCOs) and supplied to the national grid or to the Nigeria Bulk Electricity Trading Company (NBET) will be exempt, along with electricity transmitted by the Transmission Company of Nigeria (TCN) to electricity distribution companies (DISCOs).
27.5% Company Tax
Section 56 of the bill outlines tax rates to be imposed on the total profits of companies, with small firms taxed at 0 percent. All other companies will face a tax rate of 27.5 percent in 2025, which will reduce to 25 percent from 2026. If a company’s effective tax rate is less than 15 percent in any assessment year, it must recompute and pay an additional tax to bring it up to the 15 percent threshold.
This provision applies to companies within multinational enterprise groups and any company with an aggregate turnover exceeding N20 billion in the relevant year.
4% Development Levy on Companies
Section 59 stipulates a development levy on the assessable profits of companies, excluding small and non-resident companies. The levy will be four percent for 2025 and 2026, three percent from 2027 to 2029, and two percent from 2030 onwards. The levy will fund the Student Education Loan Fund.
The revenue distribution is as follows: The Tertiary Education Trust Fund will receive 50 percent in 2025 and 2026, 66 percent from 2027 to 2029, and zero percent from 2030 onwards. The Student Education Loan Fund will receive 25 percent in 2025 and 2026, 33 percent from 2027 to 2029, and 100 percent from 2030 onwards.
The National Information Technology Development Fund will receive 20 percent in 2025 and 2026, and zero percent from 2027 onwards. The National Agency for Science and Engineering Infrastructure will receive 5 percent in 2025 and 2026, and zero percent from 2027 onwards.
5% Excise Tax on Lottery and Gaming Income
Section 62 and Schedule 10 of the law propose 5 percent excise duty on revenue of lottery and gaming trade or business. In determining the assessable profits of lottery and gaming trade or business, the following deductions shall be allowed, in addition to others permitted under Chapter Two of the Act: Any amount paid as winnings, prizes or similar payments from the relevant Prize Fund; statutory contributions to the Lottery Trust Fund; agency commission expenses incurred; and levies paid to relevant regulatory and government authorities as contained in relevant federal or state laws.
‘Gaming’ includes gambling, wagering, video poker, roulette, craps, bingo, slot or gaming machine, drawings or other games of chance conducted by any person;
‘Lottery’ or ‘Lotteries’ includes any betting, game, scheme, arrangement, system, plan, promotional competition or device for the distribution of prizes by lot or chance, or as a result of the exercise of skill and chance, or based on the outcome of real or virtual sporting events, or any other game, scheme, arrangement, system, plan, competition or device.
5% Telecoms Tax
The bill proposes a five percent excise duty on telecommunications services, including postpaid and prepaid services regulated by the Nigerian Communications Commission (NCC).
