Identifying Areas of Tax Compliance Needs under the Finance Act, 2019 – Dr. Jerome Okoro



The Finance Act, 2019 came with copious far-reaching changes in the laws relating to major taxes in Nigeria. The Act is a single legislation that amends key provisions of seven existing tax laws, namely: the Companies Income Tax Act (CITA), 2004; Personal Income Tax Act (PITA), 2007; Value Added Tax Act (VATA), 2007; Petroleum Profits Tax Act (PPTA); Stamp Duties Act (SDA), 2007; Customs and Excise Tariff Act, 2004; and Capital Gains Tax Act, 2007.  It was not surprising therefore that several proposals of the preceding bill were subjected to extensive debates and discussions before the Act emerged, the 50% VAT rate increase from 5% to 7.5% being the most controversial of such. Hence, when the bill received presidential assent on January 13, 2020, much of its contents had become common knowledge outside legal and regulatory circles.

But in spite of this apparent familiarity and the continued public discussions on the Act, not much has been highlighted on the specific areas requiring practical compliance steps by the taxpayers.  While some introductions of the Act require no more than the pre-existing compliance processes or procedures, others impose new or additional compliance duties.

Below are highlights of some of the areas with compliance duties in the tax laws amended by the new Act


Section 3, Finance Act creates a new mode of identification of a company for tax purposes. Unlike the identification by the company registration number from the Corporate Affairs Commission (i.e. RC. No.), a new Section 10 of the CITA requires display of Taxpayers Identification Number (TIN) on

  • All documents of business transactions.
  • Statements, Audited Accounts, Returns, correspondences with FIRS and other regulatory agencies.

Compliance with this provision entails that every company in Nigeria must be registered for tax with FIRS, in which process the TIN is obtained. A company must include TIN in its letterhead just like the RC No. and also inscribe the TIN in regulatory compliance documents. A company filing returns and financial statements or other tax documents through consultants should mandate the consultants to include the company’s TIN on the documents.

This requirement of TIN as corporate identity under the Finance Act extends to companies exempted from incorporation under Section 54 of the Companies and Allied Matters Act, and companies either specifically exempted from tax or not bearing any tax liability in a year of assessment. This is because, all such companies are bound to file returns with FIRS by virtue of Section 55 of CITA.

Section 9 of the Finance Act exempts from income tax, the profits of a small company. A small company, for this purpose, is defined by Section 22 of the Act as one with gross turnover of N25, 000, 000 or less. The Act however mandates compliance of the company with requirements on registration, and statutory filing. For this compliance, the company, albeit exempted from CIT, shall nevertheless register with FIRS and obtain Taxpayers Identification Number (TIN). The company is also required to file its tax returns as stipulated in Section 55 of CITA. Section 55(1) requires companies to include in their returns, a true and correct statement of the amount of the company’s profit from each and every source.

Compliance with Section 55 of CITA is most essential to small companies for the purpose of securing the tax exemption granted them under the Finance Act. This is because without ascertaining actual profit of the company, FIRS resorts to deemed profit assessment under Section 30 of CITA or best of judgment assessment under Section 65 of the CITA. In deemed profit assessment, FIRS assesses the company to a fair and reasonable percentage of its turnover for a year of assessment. In best of judgment assessment, FIRS applies its discretion to determine the profit of the company when the time stipulated for returns elapses and the company has filed none, or when FIRS rejects the returns filed by the company. The criteria of deemed profit or best of judgment assessments are so vague that a small company involved in such runs the risk of having its turnover computed at above N25, 000, 000 which would push it above the threshold of tax exemption under the Finance Act. Likewise, for a medium-sized company which is defined in the Finance Act as one earning above N25, 000, 000 but below N100, 000, 000, failure to comply strictly with Section 55 on filing of returns would expose it to the discretionary modes of assessment which may push it into the range of large companies. Consequently, such a medium-sized company would lose the 20% reduced tax rate which avails it in Section 16 of the Finance Act, and then incur the 30% tax rate for large companies.


VAT compliance issue under the Finance Act lies in the requirements and processes of registration and deregistration. Before the amendment in the Finance Act, Section 8 of the VAT Act required a taxable person to register for VAT with FIRS within six months of the commencement of the VAT Act or within six months of the commencement of business, whichever was earlier.

Section 35 of the Finance Act has removed the window of six months, and now compels the taxable person to register for VAT upon commencement of business. The Finance Act has also introduced a right of deregistration for a taxable entity that permanently ceases to carry on trade or business in Nigeria. The entity is required to notify FIRS of its intention to deregister within 90 days of the cessation of business. Failure to so notify FIRS may expose the entity to the liabilities on VAT returns and remittance. Specifically, Section 42 of the Finance Act provides a penalty of N50, 000 for the first month of the failure of notification and N25, 000 for subsequent months in which the failure subsists. The same penalty applies to failure of a taxable person to notify FIRS of change of address within 30 days of the change.

The Finance Act has resolved a heated dissension concerning the liability of a Nigerian receiver of services from a non-resident supplier when the latter omits VAT in its invoice. It was a notable contention that the duty of the Nigerian receiver to remit VAT depended on the prior inclusion of VAT in the non-resident supplier’s invoice. FIRS, to the agreement of the courts, had countered this position and maintained that the duties were distinct and independent of each other; in other words, that the Nigerian receiver remained bound to remit the VAT even when the foreign-based supplier has raised no VAT invoice. Section 37 of the Finance Act rested this controversy by providing that the receiver of taxable supply in Nigeria shall, if the invoice excludes VAT, self-account for and remit the tax. With this provision, the Nigerian receiver of VAT-liable service from a non-resident supplier must stand in the gap and compute and remit VAT when the supplier has omitted VAT in the invoice.


The Finance Act repealed Section 60 of the Petroleum Profits Tax Act, thereby introducing Withholding Tax (WHT) of 10% on dividends paid out of the profits of companies engaged in petroleum operations in Nigeria.  Hence, dividends from petroleum profits now attracts WHT under the Personal Income Tax Act and the Companies Income Tax Act.

Compliance with this provision entails that an upstream petroleum company paying dividend from its petroleum profit would deduct withholding tax at 10% on the dividend accruable to an individual shareholder and remit same to the relevant tax authority based on the residency of the shareholder. For a corporate shareholder, the company deducts withholding tax at 10% on the dividend and remits it to the Federal Inland Revenue Service.


For companies, Section 3(2) of the Finance Act requires provision of TIN as a precondition to opening a new corporate account or continued operation of an existing corporate account. In like manner, Section 28 of the Act requires a person to provide his TIN to the bank before being allowed to open a new account for business, or continue to operate an existing business account. These provision resolves the wide misconception and public uproar from the assumption that the TIN requirement also applied to personal bank accounts not maintained for business purposes.

Compliance with this requirement presupposes tax registration and obtaining of TIN.


Beyond analyzing the general scope of the Finance Act with highlights of the most crucial amendments, it is imperative to address taxpayers’ minds to areas of specific compliance requirements. Equally crucial is the need to always study the amendments in the Act alongside the particular pre-existing tax law on the issue being considered. This is necessary to capture the overriding effects of the amendments. Express amendment of one Act in another, as has taken place in the Finance Act, is a very rare legislative practice. Thus, without proper care and guidance, there would be mix-ups on the prevailing provisions between the Finance Act and those other tax laws it amends. A lot of confusion would also arise on what really survives in the amended parts of the tax laws, and what to refer to in the course of compliance. FIRS rose to the occasion by releasing a number of public notices to clarify provisions of the Finance Act and guide compliance. These include:

  • Public Notice on Commencement of Finance Act 2020 Implementation, released on February 14, 2020;
  • Public Notice on the Due Date of Filing and Due Date of Payment, released on February 21, 2020; and
  • Public Notice on the Mandatory Use of Taxpayers Identification Number (TIN), released on February 21, 2020.

More of such notices are expected from FIRS. But beyond that, taxpayers are strongly advised to seek guidance from their tax consultants before the chips are down.

Dr. Jerome Okoro

Partner, Tax, Energy Law and Dispute Resolution at Hermon Legal Practitioners 08035487564.


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