basic food items, locally manufactured sanitary towels, pads and tuition fees
relating to nursery, primary, secondary and tertiary education have been added
to the exemption list of goods and services on the VAT under the Finance Law.
The President, Major General
Muhammadu Buhari (retd.), recently signed the law.
statement by Senior Special Assistant to the President on Media &
Publicity, Office of the Vice President, Laolu Akande, said this was part of
efforts to ensure that the cost of living did not rise for Nigerians because of
the changes in the Value-Added Tax.
The new Act raised Value Added
Tax from five per cent to 7.5 per cent.
“To allay fears that
low-income persons and companies would be marginalised by the new law, reduce the
burden of taxation on vulnerable segments, and promote equitable taxation, the
Finance Act 2019 had extended the list of goods and services exempted from VAT,
The statement gave the
additional exemptions as, “Basic food items –additives (honey), bread, cereals,
cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried),
live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables,
water (natural water and table water).
“Locally manufactured sanitary
towels, pads or tampons.”
The statement said it included
services rendered by microfinance banks, tuition fees relating to nursery,
primary, secondary and tertiary education.
Among other benefits, the
statement said the law would consolidate efforts already made in creating the
enabling environment for improved private sector participation and contribution
to the economy as well as boost states’ revenues.
The Federal Government stated,
“The Finance Act will support the funding and implementation of the 2020
budget. We shall sustain this tradition by ensuring that subsequent budgets are
also accompanied by a finance law.”
that the new Act was the first legislation created to accompany an
Appropriation Act since the return of democracy in 1999.
According to the Presidency,
Nigeria’s increased new VAT rate of 7.5 per cent was still the lowest in
Africa, and one of the lowest anywhere in the world.
It stated that South Africa’s
VAT was 15 per cent; Ghana; 12.5 per cent; Kenya, 16 per cent; Egypt, 14 per
cent; Rwanda, 18 per cent; and Senegal had18 per cent.
Under Nigeria’s revenue
sharing formula, 85 per cent of collected VAT would go to states and local
This meant that the bulk of
additional VAT revenues accruing from the increase will go towards enabling
states and local governments to meet their obligations to citizens, including
the new minimum wage as already noted by state governors, it said.
Before now, the Buhari
administration had resisted previous suggestions to raise VAT.
The new Finance Act exempted
businesses with turnover below N25m from VAT payment, it said.
While explaining the Companies
Income Tax, it stated that under the new law, companies with less than N25m in
annual turnover were charged zero CIT.
for companies with revenues between N25m and N100m (described in the Act as
“medium-sized” companies) had been reduced from 30 per cent to 20 per cent, it
It said that large companies
with annual turnover greater than N100m would continue to pay the standard 30
per cent CIT
The new Act included a
provision that granted all companies “engaged in agricultural production” in
Nigeria “an initial tax-free period of five years”, renewable for an additional
It added that the new Act
provided incentives to promote tax compliance through bonus reductions in the
CIT for early remittance: