Nigerian corporates and eligible taxpayers are expected to gain some reliefs when the ongoing tax law reforms are approved and implemented, according to details of the recommendations of the National Tax Policy Implementation Committee (NTPIC) seen by business.a.m.
The NTPIC had on Friday, February 2, 2018, presented its progress report on the review of tax laws and regulations, and proposed tax reforms to Kemi Adeosun, the minister of finance.
The recommendations are put together in two Executive Orders and five Amendment Bills as follows: Executive Orders Value Added Tax Act (Modification) Order; Review of Goods Liable to Excise Duties and Applicable Rates Order; 2017 Amendment Bills Companies Income Tax Act (Amendment) Bill; Value Added Tax Act (Amendment Bill); Customs, Excise, Tariff etc. (Consolidation) Act (Amendment) Bill; Personal Income Tax Act (Amendment) Bill; and Industrial Development (Income Tax Relief) Act (Amendment) Bill.
The proposed changes to the tax laws, according to Taiwo Oyedele, the vicechairman of the committee, would achieve the following: increase and diversify government revenue, simplify paying taxes and doing business, promote MSMEs, protect vulnerable persons, and remove obsolete, ambiguous and contradictory provisions in the law.
Some of the major areas of the recommendations by the NTPIC include reviews of the Company Income Tax Act, Value Added Tax Act, Customs Excise and Tariff Act (CETA), Personal Income Tax Act (PITA)/ Pension Contribution, and Industrial Development (Income Tax Relief) Act (IDITRA) and Tertiary Education Trust Fund (Establishment, Etc.) Act.
The mandate of the committee was to carry out reviews of tax laws and regulations in accordance with the recommendations of the NTP, while taking into consideration the Economic Recovery and Growth Plan (ERGP) and the Ease of Doing Business Plan. One major boon of the recommendations is the deletion of Section 16(7) of CITA, which restricts carry forward of losses by insurance companies to four years and replacing it with a new subsection that allows indefinite carry forward of losses.
There is also an amendment of Section 19 of CITA to avoid double taxation of retained earnings on which tax has been paid and exclude exempt profits from excess dividend tax.
Others are deletion of commencement rule provisions to reduce the impact of double taxation on new companies, amendment of Section 31(2)(a)(ii) to allow for indefinite carry forward of losses made by companies during their commencement period, deletion of Section 39(1)(e) to remove bureaucracy regarding ministerial approval for loan obtained for gas projects and to improve ease of doing business, and deletion of other overlapping and obsolete provisions on value added tax, the committee recommended that Section 2 and 46 of VATA be amended to include “intangible property” as a chargeable item and define ‘taxable supplies”, respectively.
The inclusions cover guidelines on turnover thresholds for VAT registration and giving the ministry of finance the power to amend the threshold, and the inclusion of a section imposing an obligation to self-account for VAT on recipients of taxable supplies by nonresident companies (NRCs), regardless of whether the NRC charged VAT on its invoice or not.
Overlapping and obsolete provisions in the VATA were equally recommended for deletion as well as modification of Part 1 and 2 of the First schedule to VATA, through an Executive Order, to include residential property leases or rentals, shared passenger –transport services, life insurance as VAT exempt goods/services and deletion of obsolete provisions regarding Customs Excise and Tariff Act (CETA), NTPIC recommended the introduction of a specific rate system in addition to the existing ad valorem rate system for tobacco and alcoholic products and the inclusion of eight additional items to the list of goods manufactured in Nigeria that are subject to excise duties in line with ECOWAS directive.
For individual taxpayers, the Personal Income Tax Act (PITA)/ Pension Contribution, the mode of delivery of notice of objection is modified to include delivery in person, by courier or via electronic mail, to accommodate developments in ICT.
Other modifications include the admissibility of the different names adopted by State Revenue Authorities admissible by the law and deletion of overlapping and obsolete provisions.