A proposed new tax legislation seeks to provide Value Added Tax (VAT) exemptions to oil and gas exports, crude petroleum oil and feed gas for all processed gas, as well as goods purchased for use in humanitarian donor-funded projects.
But the heavily taxed telecommunications sector appears seemingly overlooked.
The Nigeria Tax Bill, 2024, also seeks to exempt baby products, locally manufactured sanitary towels, pads or tampons, military hardware, arms, ammunitions and locally manufactured uniforms supplied to armed forces, para-military and other security agencies of a Nigerian government from payment of VAT.
Equally pencilled for exemption from VAT were shared passenger road-transport service; and purchase, hire, rental or lease of tractors, ploughs and other equipment used for agricultural purposes, provided that the person engaged in agricultural business shall first pay the VAT and request a refund from the tax authority.
Others were supplies consumed by an approved entity in the export processing or free trade zones, provided that the supplies were consumed on its approved activity; and goods or services supplied to a diplomatic mission, diplomat or person recognised under the Diplomatic Immunities and Privileges Act whose activity is in public interest, and not for profit.
In addition, plays and performances conducted by educational institutions as part of learning; land or building, including interest in land or building; and money or securities, including interest in money or securities were free from VAT obligations.
Furthermore, the proposed law specified taxable supplies charged to VAT at the rate of zero per cent.
These included basic food items; all medical and pharmaceutical products, including medicinal herbal products; educational books and materials; fertilisers; locally produced agricultural chemicals; locally produced veterinary medicine; locally produced animal feeds; and agricultural seeds and seedlings.
Others were electricity generated by generation companies (GENCOs) and supplied to National Grid or Nigeria Bulk Electricity Trading Company (NBET); Electricity transmitted by Transmission Company of Nigeria (TCN) to Electricity Distribution Companies (DISCOs); medical services; and tuition relating to nursery, primary, secondary or tertiary education.
Included also were exported goods excluding oil and gas; exported services; exported incorporeal property; and medical equipment.
In addition, under Exemption by Order of the President, the bill stated that where a government or an agency of a government in Nigeria had entered into an agreement with the government of another country or a donor agency for the provision of development financing for any project in Nigeria, and such agreement provided for the exemption of supplies made under the project from VAT, the president might, by an order published in the official gazette, give effect to the exemption.
The section covered basic food Items, cereals, including maize, rice, wheat, millet, barley, sorghum, oats, fonio and finer millet, in the form of grain, flour, crop, whether raw or semi-processed, whether in bulk or retail, among a host of other items.
To address the issue of double taxation, the bill expressly provided,
“Where the Government of the Federal Republic of Nigeria enters into an agreement with a treaty partner for the purpose of providing relief from double taxation in relation to tax imposed under this Act, the agreement shall have effect upon ratification or domestication by the National Assembly.”
It stated that relief from double taxation shall be in respect of income tax paid under the laws of a treaty partner against income taxes imposed under this Act.
The bill added,
“Where an agreement has taken effect, any obligation as to secrecy in the Nigeria Tax Administration Act or any other law in Nigeria shall not prevent the disclosure of any information required to be disclosed under the agreement to an authorised officer of a treaty partner.”
It also provided, “The Minister may make rules for implementing the provisions of any agreement under this section. For the purposes of providing relief in Nigeria from double taxation, all extant double taxation agreements are deemed to have been made under the provisions of this section and shall apply throughout Nigeria with effect from 1st January of the year immediately following the date the agreement entered into force.
“The agreement in subsection (1) of this section shall be for the purpose of elimination of double taxation, without creating opportunities for non-taxation or reduced taxation through tax evasion, avoidance or other forms of abuse, including treaty-shopping arrangements aimed at obtaining reliefs provided in the agreement for the indirect benefit of residents of any other country or territory that is not part of the agreement.
“For the purposes of the agreement referred to in subsection (1) of this section, a non-resident may benefit under the agreement where the person is a resident of the relevant treaty partner and the beneficial owner of the income for which the benefit is being claimed.”
The proposed law stated, “Nothing in this section shall be construed to allow a relief in respect of an additional tax paid for the relevant tax year under this Act or the domestic legislation of a treaty partner in conformity with the global minimum tax rules as it relates to a permanent establishment situated in the treaty partner.”
The Nigeria Tax Bill, 2024, further expatiated on the presumptive taxation regime, allowing the minister to determine taxes payable in certain circumstances.
It stated, “Notwithstanding any provisions of chapter two of this Act, where for all practical purposes, the income of a person chargeable to tax under this Act cannot be ascertained or records are not kept in such a manner as to enable proper assessment of income, then such person shall be assessed on such terms and conditions as may be prescribed by the Minister in a regulation under a presumptive tax regime.
“The chargeable income of an individual, is the total income of that individual ascertained under the provisions of section 28 of this Act, less eligible deductions. For the purposes of this section… ‘Eligible Deductions’ include payments made by the individual in a year of assessment in respect of— the individual’s contributions under the National Housing the individual’s contributions under the National Health Insurance Scheme, the individual’s contributions under the Pension Reform Act, interest on loans for developing an owner-occupied residential house.
“… annual amount of any annuity or premium paid by the individual during the year preceding the year of assessment in respect of insurance on his life or the life of his spouse, or contract for a deferred annuity on his own life or the life of his spouse, and rent relief of N200,000 or 20 per cent of annual rent paid, whichever is lower, provided that the individual accurately declares the actual amount of rent paid and other relevant information as may be prescribed by the relevant tax authority.”
Meanwhile, the 19 Northern Governors have rejected some provisions of the proposed tax reforms.
