Understanding the Nigerian Finance Act 2019: What You Need to Know

In January 2020, Nigeria made a significant stride in economic reform with the enactment of the Finance Act 2019—the first of its kind in over two decades. This landmark legislation was designed to align the country’s tax laws with evolving economic realities and to support the implementation of the 2020 national budget.

Here are the key highlights:

1. Increase in VAT

The Act increased Value Added Tax (VAT) from 5% to 7.5%, aimed at boosting non-oil revenue. While this sparked debate, it was seen as a necessary step to support infrastructural development and social spending.

2. Support for Small Businesses

To encourage growth in the SME sector:

• Companies earning less than ₦25 million annually are now exempt from paying Company Income Tax (CIT).

• Those with revenues between ₦25 million and ₦100 million enjoy a reduced CIT rate of 20%.

This progressive structure was introduced to ease the tax burden on small and growing enterprises.

3. Digital Economy & Stamp Duty

The Act acknowledged the rise of digital transactions by clarifying rules around stamp duties and expanding the tax net to include online and electronic payments, aiming to bring more businesses into the formal system.

4. Taxation of Non-Resident Companies

Foreign companies providing digital services to Nigerian consumers—like online advertising or streaming—are now subject to taxation if they have a “significant economic presence” in Nigeria.

5. Changes in Personal Income Tax

Employees are no longer required to present a Tax Identification Number (TIN) to open or operate a bank account. Instead, banks are expected to obtain and validate customers' TINs, streamlining compliance.