Member, Fiscal Policy Reforms Committee and Managing Partner, Pedabo Professional Service, Albert Folorunsho on Monday, has revealed the overview key reforms in the Financial Act 2020 on how it will enhance ease of doing business and support business efficiency for individuals, businessmen and corporate organisations.
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Speaking as one of the panelists at the Financial act stakeholder engagement session virtual meeting organized by KPMG Nigeria in collaboration with the Federal Ministry of Finance, Budget and National Planning, Folorunsho highlighted five major areas of tax amendment act of 2020 that include company income tax, personal income tax, tertiary education trust fund tax, stamp duties and federal inland revenue service.
According to him, the act has now reduced minimum tax payable by all companies, save for those expressly exempted, from 0.5% to 0.25% for tax returns prepared and filled for any years of assessment falling due on any date for the year 2021.
On the deductible donations for companies who support the alleviation of pandemic impact and natural disaster, Folorunsho affirmed that such companies would be given deductions as they will be mandated to show requisite documentations evidence and cost to the tax authority and amount allowable for deduction in any year is limited to 10% of the assessable profits, after deduction of other allowable donations made by the company.
The 2020 Finance Act now permits the use of electronic means to exchange correspondence between FIRS and taxpayers which is aligns with the similar introduction to personal income tax act by the finance act 2019.
Meanwhile, under the mis-statement of profits and taxes, Federal government has introduced new penalty for deliberate and dishonest once detected, the company is immediately liable to pay any outstanding tax including penalty and interest which will be deemed to accrue from the date the incorrect return was due for filling. He said.
‘For tax returns of small and medium companies, instead of audited account, FIRS may specify by notice as an alternative to be included in the tax returns to be filled by small and medium-sized companies. This aligns with the provision of CAMA 2020 for making it optional for small companies to appoint auditors.
Tax on internet relating to foreign and agricultural loans, the tax relief on agricultural trade or businesses is now limited to primary agricultural production. Moratorium period for qualifying for the loans is now also reduced from 18 months to 12 months and the rate of interest restricted to the based lending rate at the time the loan was granted. Non-resident companies, it is now therefore clarified under the Companies income tax, that only foreign companies which do not have a PE, direct agent, significance economic presences or not involved in a turnkey project in Nigeria, are exempted from filing income tax returns.
Regarding to customs and excise tariff in the new financial act, imported goods whose materials are not locally were exempted previously has now been amended, therefore all imported goods are now subject to excise duties whether substitutes are locally available or not.
Meanwhile on duty-free importation of Aircraft, airlines registered in Nigeria and providing commercial air transport services shall be entitled to free importation of their aircrafts, engines, spare parts and whether purchased or leased. Amendment of specific rates and levies on Vehicles thus, Tractors (HS Headings8701) from 35% old duty rate to 5%; Motor vehicles for the transport of more than 10 persons (HS Headings 8702) from 35% old duty to 10%; Motor vehicles for the transport of persons (cars) HS Headings 870 from 30% to 5%; Motor Vehicles for the transport of goods (HS heading 8704) from 35% to 10% duty.
Excise Duties on Telecommunication service, Telecommunication services provided in Nigeria are now to be changed with excise duties. The applicable rates are to be as the president may by Order prescribe pursuant to section 13 of the CETA.
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