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Nigeria: Tax provisions in Finance Act, 2019

Nigeria: Tax provisions in Finance Act, 2019

The Finance Act, 2019 introduces changes to various tax regimes in Nigeria including:


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  • Companies income tax, including measures concerning the taxation of non-resident companies
  • Value added tax (VAT), including an increase in the VAT rate to 7.5% (from 5%)
  • Petroleum profits tax, including repeal of a tax exemption for dividends paid from after-tax profits
  • Individual (personal) income tax
  • Capital gains tax, including a limited deduction for loss of office
  • Customs and excise tax
  • Stamp duty (tax)

Amendments under the Finance Act are intended to raise revenue, among other objectives.

Non-resident companies, nexus and digital economy

The Finance Act includes provisions that create nexus for the taxation of income earned by foreign companies from technical, management, consultancy or professional services that are remotely provided to a person resident in Nigeria. The tax on these foreign companies will be limited to the tax withheld (deducted) from payments made to them.

The Finance Act also introduces provisions to tax any foreign company that:

…transmits, emits or receives signals, sounds, messages, images or data of any kind from cable, radio, electromagnetic systems or any other electronic or wireless apparatus to Nigeria in respect of any activity, including electronic commerce, application store, high frequency trading, electronic data storage, online adverts, participative network platform, online payments and so on, to the extent that the company has significant economic presence in Nigeria and profit can be attributable to such activity.

The Finance Act does not define what constitutes “significant economic presence,” but it authorizes the Minister of Finance to define the term. The expectation is that ministerial guidance will be provided.

Prior to the Finance Act, 2019, a non-resident company was only subject to tax in Nigeria if it had a fixed base in Nigeria and the taxable profit was the profit attributable to that fixed base. In other words, the nexus for taxing profits derived by a foreign company in Nigeria previously was based on its physical presence in Nigeria. With the amendment, non-resident companies involved in e-commerce, filming, computing, ride-sharing services, media, etc., that previously had no fixed base in Nigeria will now be liable to Nigerian income tax, assuming the companies satisfy the “significant economic presence” threshold. These entities may be required to register for taxes and file income tax returns in Nigeria.

Read a January 2020 report [PDF 4.48 MB] providing analysis of the tax measures in the Finance Act, 2019, prepared by the KPMG member firm in Nigeria

Additional information is available from KPMG in Nigeria, including text of the legislation: Finance Act, 2019: Impact Analysis

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

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