The Nigerian Tax Bill 2024: A Comprehensive Framework for Economic Growth and Tax Reform

The Nigerian Tax Bill 2024 is a landmark legislative initiative aimed at overhauling Nigeria’s tax system to foster economic growth, enhance compliance, and simplify administration. By consolidating multiple tax laws into a single Nigeria Tax Act, the Bill seeks to address inefficiencies in the existing framework, adapt to modern economic realities, and align with global tax practices. This comprehensive approach underscores Nigeria’s commitment to creating a fair, sustainable, and globally competitive tax system.

In this newsletter, I will provide a detailed examination of the Bill, covering its nine chapters, 13 schedules, and the broader implications for taxpayers, tax professionals, and administrators.

Key Features of the Nigerian Tax Bill 2024

Chapter 1: Objectives and Scope

The foundation of the Bill is its ambition to repeal and consolidate existing tax laws into a unified framework. This chapter:

• Standardizes Taxation by creating consistency across various tax instruments, such as income, transactions, and asset-based taxes.
• Applies Nationwide, covering individuals, corporations, and non-residents with tax obligations in Nigeria, thereby ensuring a harmonized tax system.
• This streamlined approach eliminates ambiguities, simplifies compliance, and fosters a robust legal framework for tax administration.

Chapter 2: Taxation of Income

This chapter establishes the principles for taxing income earned by individuals, corporations, and non-resident entities.

• Corporate Income Tax: Corporations are taxed on both local and foreign earnings related to Nigerian operations. The section provides for allowable deductions, such as employee compensation and pension contributions, while excluding non-operational expenses like fines and penalties.
• Individual Income Tax: Covers various income streams, including salaries, rents, dividends, and digital asset gains, ensuring comprehensive taxation of personal income.
• Non-Resident Entities: Imposes taxes on entities with significant economic activities in Nigeria, including digital services. Introduces withholding taxes as a final tax for non-residents without permanent establishments.
• In addition, the chapter aligns Nigeria’s tax system with global standards, particularly in addressing the complexities of cross-border and digital transactions.

Chapter 3: Taxation of Petroleum Operations

Recognizing the strategic importance of Nigeria’s petroleum sector, this chapter introduces a detailed framework for taxation:

• Hydrocarbon Tax: Applies rates of 30% or 15% to upstream operations, depending on the lease type.
• Petroleum Profits Tax: Governs unconverted oil prospecting licenses and mining leases, with a standard rate of 85%.
• Production Sharing Contracts: Establishes mechanisms for revenue sharing in deep offshore and inland basin operations.

These provisions ensure equitable revenue sharing, attract investments in challenging terrains, and maintain fiscal sustainability in the sector.

Chapter 4: Relief from Double Taxation

To mitigate the risk of double taxation for Nigerian residents with foreign income, the Bill introduces:

• Unilateral Relief: Provides tax credits for countries without a tax treaty, based on taxes paid abroad.
• Double Taxation Agreements (DTAs): Offers relief for residents of treaty countries, ensuring reduced tax liabilities and enhanced cross-border trade.

This chapter promotes international trade, safeguards residents’ income, and strengthens Nigeria’s position in the global tax landscape.

Chapter 5: Stamp Duties

The Bill modernizes the administration of stamp duties by:

• Expanding the scope to include bills of exchange, promissory notes, lease agreements, and mineral asset transfers.
• Introducing electronic tagging and digital receipts to streamline payment processes.
• Establishing high-value thresholds for certain instruments to reduce compliance burdens on smaller transactions.

These updates enhance efficiency, protect revenue, and ensure the tax system keeps pace with modern financial practices.

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Chapter 6: Value Added Tax (VAT)

The VAT framework is overhauled to:

• Broaden the Base: Include goods, services, and intangible assets consumed in Nigeria.
• Increase Rates Gradually: From 10% in 2025 to 15% by 2030, ensuring predictable tax policies for businesses.
• Mandate Non-Resident Compliance: Require VAT registration for foreign entities supplying digital and other services to Nigeria.

These changes align with international best practices, simplify compliance, and secure revenue from the growing digital economy.

Chapter 7: Excise Duties

Excise duties are introduced on high-consumption services, such as:

• Telecommunications, gaming, and betting.
• Currency exchange transactions involving off-market rates, to curb speculation and protect revenue.

This chapter diversifies Nigeria’s tax base, capitalizing on rapidly growing industries while addressing emerging economic challenges.

Chapter 8: Tax Incentives

To stimulate investment and economic growth, the Bill provides:

• Income Tax Exemptions for educational institutions, charities, and certain investment incomes.
• Development Incentives for priority sectors like agriculture and technology, allowing tax credits for qualifying companies.
• VAT and Stamp Duty Exemptions for essential goods and services, such as healthcare, education, and food.

These targeted incentives encourage investment, foster innovation, and support the government’s developmental agenda.

Chapter 9: General Provisions

This chapter addresses administrative and procedural issues, including:

• Business Restructuring: Simplifies tax rules for mergers, acquisitions, and asset transfers.
• Anti-Avoidance Measures: Strengthens safeguards against tax avoidance schemes.
• Regulatory Authority: Empowers tax administrators to issue regulations for effective implementation.

By addressing challenges in tax administration and compliance, this chapter enhances the efficiency and enforceability of the Bill.

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Schedules: Detailed Provisions

The Bill’s 13 schedules provide granular details on various tax policies, including:

• Capital Allowances for assets in key industries such as mining and telecommunications.
• Progressive Income Tax Rates for individuals, with rates ranging from 0% to 25%.
• Petroleum and Mineral Royalties, ensuring equitable revenue sharing.
• Export Incentives for entities exporting 100% of their goods or services.

These schedules ensure the Bill’s provisions are both detailed and adaptable to Nigeria’s diverse economic sectors.

Economic Impact

The Nigerian Tax Bill 2024 is poised to deliver transformative economic benefits:

• Enhanced Revenue Collection: By broadening tax bases and improving compliance mechanisms.
• Fostering Investment: Through targeted incentives for priority sectors and export-driven businesses.
• Promoting Fairness: By introducing progressive tax rates and ensuring equitable contributions from non-residents.

Overall, the Bill positions Nigeria as a competitive and resilient economy on the global stage.

Stakeholder Impacts

For Taxpayers:

• Simplified Compliance: Through unified laws and digital tools.
• Economic Relief: Via targeted exemptions and incentives for specific sectors.

For Tax Professionals:

• More Opportunities: In specialized areas such as international taxation and digital services.
• Increased Demand: For advisory services, especially in navigating the new tax regime.

For Tax Administrators:

• Modernized Tools: For monitoring compliance and addressing evasion.
• Streamlined Processes: For assessing taxes and providing incentives.

Conclusion

The Nigerian Tax Bill 2024 marks a significant milestone in the nation’s fiscal policy. Its comprehensive structure addresses inefficiencies, fosters compliance, and supports economic growth. For taxpayers, tax professionals, and administrators, the Bill offers clarity, opportunities, and a roadmap to a sustainable and inclusive tax environment. By aligning with global standards and embracing modern economic realities, the Bill is set to transform Nigeria’s tax system, driving long-term prosperity for all stakeholders.

Olatunji Abdulrazaq CNA, ACTI

Founder, Taxmobile.Online