TRENDING IN 48-Hrs

FG lists items exempted from VAT by Finance Act

Federal Government has clarified that tuition relating to nursery, primary, secondary and tertiary education, several basic food items and locally manufactured sanitary towels have been exempted from attracting value added tax.

President Muhamadu Buhari last Monday signed the 2019 Bill, which among others, increased the VAT rate from five per cent to 7.5 per cent among other amendments to seven existing Acts relating to taxes and levies.

A clarification by senior special assistant to the president on media and publicity in the office of Vice President, Laolu Akande, explained that the exemption was to ensure that cost of living does not rise for Nigerians because of the changes in VAT.

Basic food items additives that have been added to the VAT exemption list are 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).

Akande added that locally manufactured sanitary towels, pads or tampons; services rendered by microfinance banks; as well as tuition relating to nursery, primary, secondary and tertiary education are now also on the list.

He explained that the law is also expected to 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.

Quoting Buhari, Akande said, “the Finance Bill 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 Bill.”

Nigeria’s increased new VAT rate of 7.5% is still the lowest in Africa, and one of the lowest anywhere in the world. (South Africa VAT: 15%; Ghana: 12.5%; Kenya: 16%; Egypt: 14%; Rwanda: 18%; Senegal: 18%).

Making further clarifications, he noted that current revenue sharing formula arrangement allocates 85 per cent of VAT revenue goes to states and local governments with the Federal Government taking the balance of 15 per cent.

“This means that the bulk of additional VAT revenues accruing from the increase will go towards enabling states and local governments meet their obligations to citizens, including the new minimum wage as already noted by state governors.

“Before now, the Buhari administration had firmly resisted previous suggestions to raise VAT.”

The new Finance Act exempts businesses with turnover below N25 million from VAT payments and Companies Income Tax (CIT).

CIT for Companies with revenues between N25 and N100m (described in the Act as “medium-sized” companies) has been reduced from 30% to 20% while large companies with an annual turnover greater than N100m will continue to pay the standard 30% CIT.

Grants to all companies “engaged in agricultural production” in Nigeria “an initial tax-free period of five years”, renewable for an additional three years.

As an incentive for tax compliance, medium-size companies will have two per cent tax bonus while other companies will get one per cent.

The new Act now includes “electronic mail” as an acceptable form of correspondence for persons disputing assessments by the Tax Authorities.

With the new Act, the N50 Stamp duty charge is now applicable only to transactions amounting to N10,000 and above, a significant increase on the former threshold of N1,000.

To reduce unfair advantages previously conferred on imported goods at the expense of locally manufactured ones, certain imported goods are now subject to excise duties similar to locally manufactured goods.

SPONSORED

MORE INTERESTING POSTS

LATEST UPDATES

Get real time updates directly on you device, subscribe now.

Leave A Reply

Your email address will not be published.