Corporate Tax News Issue 57 - January 2021

Introduction of additional COVID-19 palliatives - Draft Finance Bill 2021

Additional COVID-19 Tax Palliatives

Penalty and interest waiver: The Federal Inland Service (FIRS) announced a waiver of penalty and interest due on all tax arrears from self-assessment and government assessment as a result of an audit, field audit or tax investigation, provided the principal sums of the tax arrears were remitted to the FIRS on or before 31 December 2020.   The penalties and interest waived are 10% and 19% per annum respectively.   The FIRS also announced that the monthly extension granted earlier for the filing of WHT and VAT at the end of the following month, as against the 21st day of the following month, is still in force. 

Remittance of Taxes In Foreign Currency: Due to the difficulty in sourcing foreign exchange (FOREX) in Nigeria, the FIRS also announced that taxpayers have the option of paying in Naira (NGN), taxes that are hitherto due for remittance in foreign currency at the prevailing Investors & Exporters (I & E) FOREX window rate on the day of payment.

Finance Bill 2021

The Finance Bill 2021 proposes amendments to Capital Gains Tax, Companies Income Tax, the Industrial Development (Income Tax) Relief Act, Personal Income Tax, the Tertiary Education Tax and the Federal Inland Revenue Service Act, amongst other measures proposed in the 2021 Budget. 

Some of the proposed amendments to the Nigerian tax laws are highlighted below.

  • Companies Income Tax Act

As part of the Covid-19 palliatives, the Bill seeks to reduce the minimum tax rate from 0.5% of turnover to 0.25% in respect of Financial Statements ending on any date between 1st January 2020 to 31 December 2021.

The Bill also proposes amendments to sections of the Companies Income Tax Act (CITA) on allowable donations, to include donations made to the Covid-19 Crisis Intervention Fund or similar funds established by the States or Federal Government.  Donations made in cash or in kind in respect of any pandemic, natural disaster or other exigency to the funds would be treated as an allowable deduction from profit, subject to a maximum of 25% of assessable profit after deduction of other allowable donations made by the Company.  Any donation in excess of the benchmark will not be carried forward for more than two succeeding years of assessment.

  • Personal Income Tax Act

The Bill seeks to amend the provisions of the Personal Income Tax Act (PITA) on commencement and cessation of business by individuals taxable under the PITA, in order to align provisions of the Act with the changes introduced by the Finance Act 2019 to the provision of CITA. 

Another provision in the bill is aimed at harmonising the provision of PITA with that of CITA on significant economic presence. 

The bill introduces to PITA the taxation of individuals, executors or trustees who render technical, management, consultancy and professional services to a person resident in Nigeria, to the extent that the individual, executor and trustee has a significant economic presence in Nigeria.

  • Tertiary Education Tax Act

The Bill seek to exempt small businesses with turnover of less than NGN 25 million from payment of education tax, because the Finance Act 2019 exempts similar businesses with turnover of less than NGN 25 million from payment of income tax and the addition of VAT to their invoices.


It should be noted that the Finance Bill 2021 does not have any force of law until it is passed by the National Assembly and receives assent from the President.  The above summary is therefore for information only, and should not be relied upon in taking any business decision.

Kamar Salami