Finance Bill 2021: Stakeholders Engagement Begins


Monday, November 16, 2020 / 12:30 PM / by Deloitte / Header Image Credit: EcoGraphics

Download Here - Draft Finance Bill 2021

The Federal Ministry of Finance, Budget and National Planning has released the draft version of the 2020 Finance Bill (the Bill) to the public for consultation. This affirms the Federal Government of Nigeria's commitment to enact Finance Acts annually, alongside the passage of the budget into law (i.e. enactment of Appropriation Act). It also aligns with global best practice, especially as tax is a significant contributor to the Government's revenue.


The 2021 Bill is set to amend the provisions of the Capital Gains Tax Act, Companies Income Tax Act (CITA), Industrial Development (Income Tax Relief) Act (IIDITRA), Personal Income Tax Act (PITA), Tertiary Education Trust Fund Act, Customs & Excise Tariff (Consolidation) Act, Value Added Tax Act (VATA), Federal Inland Revenue Service (Establishment) Act, the Fiscal Responsibility Act and the Public Procurement Act.


The draft Bill is still being discussed and stakeholders' engagement ongoing. Therefore, some of the proposed changes may eventually not be passed into law, while new changes may be added. We will continue to monitor the development and provide updates in this regard.

Some of the major/key amendments are as follows:


Thematic Area

Key Focus



Capital Gains Tax

Compensation for loss of office

Capital gain tax on compensation for loss of office would be limited to an amount in excess of the NGN10 million threshold


Companies Income Tax

Agricultural Production


Incidental Income for international shipping/ air transport companies



COVID-19 incentives, (minimum tax and deductibility of donations.


 Gas Utilization


 Non-resident companies filing


 Notice of assessment






"Agricultural trade or business" has been renamed as 'Primary Agricultural Production'. The new definition clearly excludes processing and manufacturing of all forms of agricultural products.

 The specialized approach of calculating income tax for international shipping/air transport companies, under Section 14 of CITA, would apply to shipping/transport/freight income. Non-freight income, leasing, containers and other incidental income will be taxed under Section 9 of CITA, as non-specialized.

Minimum tax rate reduced to 0.25% of gross turnover less franked investment income. This reduction, which is a COVID-19 incentive, applies to tax returns filed in respect of financial years ending between 1 January 2020 and 31 December 2021.

Tax deductibility of COVID-19 crisis intervention fund donations, as well as providing the framework for the deductibility of such donations in the future. Deductibility is restricted to 25% of assessable profit, and any unrelieved balance may be carried forward for up to a maximum of two years.


Companies that claim the gas utilisation incentive under CITA would not be entitled to similar incentives under the Petroleum Profits Tax Act or IDITRA.

Clarification of the components of the income tax returns of non-resident companies. The key component is an audited financial statement for Nigerian operations. This requirement does not apply to non-resident companies whose tax exposure in Nigeria is limited to withholding tax

Services of notice of assessment can be done electronically or by courier.

Qualifying expenditure has been redefined to include capital expenditure incurred on the development and acquisition of software.


Pioneer Status Incentive

 Primary agricultural Production

Introducing "primary agricultural (i.e. crop, livestock, forestry and fisheries) production" as a pioneer industry. Companies involved in these activities are eligible to apply for pioneer status incentive.


Personal Income Tax

Significant economic pressure


  Commencement and cessation rules


 Gross Income definition

  Introduction of Significant Economic Presence rules to the taxation of certain categories of non-resident individuals, executors or trustees. The Minister of Finance will issue rules to define SEP from a PITA perspective

 Revised commencement and cessation tax rules to prevent double tax. This is to align with the prior amendment to CITA in this regard. Tax will be applied on the basis of the individual's accounting year.

   Introduction of a definition for gross income, which is the basis for calculating consolidated relief allowance. It is defined to mean income from all sources, excluding non-taxable income, tax-exempt income, income on which no further tax is payable, allowable business expenses and capital allowances.


Tertiary Education Tax

Exemption for small companies

Small companies are exempt from paying tertiary education tax


Customs and Excise

Non-applicability excise duty exemption




Services are now subject to excise duties

The exemption from excise duties on imported goods and goods manufactured locally would no longer apply

 Services are now subject to excise duties based on the applicable rates in the Fifth schedule


Value Added Tax

Time of supply of goods or services



 The 7.5% increase in VAT commenced 1 February 2020

 Time of supply of goods or service is the later of date of supply or date of invoice. More specific rules to clarify how to determine the date of supply introduced in the Bill

The Bill clarifies that the commencement date of the 7.5% increase in VAT as 1 February 2020


Tax administration

Administration of tax laws

  The Federal Inland Revenue Service (FIRS) is empowered to use technology to collect taxpayer information and ensure the confidentiality of information collected

   FIRS is empowered to conduct hearings virtually



Unclaimed dividend

Establishment of a Trust Fund

Creation of an unclaimed dividends trust fund for public companies on any Stock Exchange in Nigeria. The aforementioned trust fund will warehouse all dividends that have not been claimed for at least three years from the date of declaration of the dividend.  Where the dividends remains unclaimed for a period of twelve years after transfer to the trust fund, it will be transferred to the Federation Account as Federation Revenue.

Download Here - Draft Finance Bill 2021

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