The new Finance Act 2019 set to take effect from February excludes basic food items, sanitary towels, pads, and tuition fees from elementary schools to tertiary institutions from the payment of value added tax (VAT), federal government disclosed at the weekend.
It listed such food items on which no VAT is required as: additives (honey), bread, cereals, cooking oils, culinary herbs, fish, flour and starch.
Others are: fruits (fresh or dried), live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables and water (natural water and table water).
A statement by Vice-President Yemi Osinbajo’s spokesman,. Laolu Akande, said the Act would among others, consolidate on “efforts already made in creating the enabling environment for improved private sector participation and contribution to the economy as well as boost states’ revenues.”
According to Akande, contrary to fears that low-income earners and companies would be marginalised by the Act, it rather reduced the burden of taxation on vulnerable groups, promote equitable taxation and extended the list of goods and services hitherto exempted from the amended Act.
He highlighted such services exempted from VAT to include those rendered by microfinance banks, with claims that the new VAT rate increase of 7.5 per cent from the former five percent remains the lowest in Africa, and one of the lowest anywhere in the world.
He also listed VAT rates in some African countries such as South Africa (15 pe rcent), Ghana (12.5 per cent), Kenya (16 per cent, Egypt (14 per cent), Rwanda (18 per cent) and Senegal (18 per cent).
Akande also said the new Finance Act exempts businesses with the turnover below N25 million from the payment of VAT and Companies’ Income Tax (CIT), emphasising that companies with less than N25 million annual turnover won’t pay CIT.
The statement, however, said CIT for companies with revenues between N25 million and N100 million, classified as “medium-sized” companies has been reduced from the hitherto 30 per cent to 20 per cent adding that large companies with annual turnover that is greater than N100 million will continue to pay the standard 30 per cent CIT.
It added: “The new Act includes a provision that grants to all companies ‘engaged in agricultural production’ in Nigeria ‘an initial tax-free period of five years,’ renewable for an additional three years.”