Bank customers in Nigeria are about to be made to present tax cards very soon according to the Financial bill passed by the National Assembly.
A report by The Nation has shown that evidence of tax payment will be
a condition for operating a bank account from January. This was
revealed in the Financial bill passed by the National Assembly.
The Bill, submitted to the lawmakers with Budget 2020 by President
Muhammadu Buhari, is designed to improve financial operations of the
country and streamline the tax regime.
It is expected to be signed with the budget before end of the month, to
actualise the return to the January – December budget cycle.
According to a section of the Bill, banks will require anybody opening an account to provide his Tax Identification Number (TIN)
Those who already have accounts with banks will also be required to provide their TIN.
There are 30 million Bank Verification Numbers (BVN)-linked accounts.
The intention is to make sure that more people are captured into the tax net.
According to the Joint Tax Board, the tax identification number (TIN) is
a unique identifier for an individual or a company for tax remittance.
The TIN is prepared by the tax office and issued for proper identification and verification.
Applying for TIN is free. The TIN generation process is real-time and should not exceed 48 hours after a request is submitted.
Another major feature of the Financial Bill is the hike in Value Added Tax (VAT) to 7.5 per cent from the extant five per cent.
Also in the bill, emails will be accepted by the tax authorities as a formal channel of correspondence with taxpayers.
The bill will also strategically “promote fiscal equity by mitigating
instances of regressive taxation; reform domestic tax laws to align with
global best practices; introduce tax incentives for investments in
infrastructure and capital markets; support small businesses in line
with the ongoing Ease of Doing Business Reforms; and raise revenues for
the Government by various fiscal measures.”
Under the proposed Personal Income Tax Act: the bill will state that
pension contributions no longer require the approval of the Joint Tax
Board (JTB) to be tax-deductible.
The bill when signed into law, will remove the tax exemption on
withdrawals from pension schemes except the prescribed conditions are
met.
The bill will come up with a penalty for failure to deduct tax by agents
appointed for tax deduction. This penalty is 10 per cent of the tax not
deducted, plus interest at the prevailing monetary policy rate of the
Central Bank of Nigeria (CBN).
The conditions attached to tax exemption on gratuities will be removed
by the bill, meaning that gratuities are unconditionally tax exempt. The
duties currently performed by the Joint Tax Board (JTB) as it relates
to administering the Personal Income Tax Act, will now be performed by
the FIRS.
Another penalty that will come into effect when the bill becomes law
will be the penalty for late filing of the Value Added Tax (VAT)
returns.
The penalty for failure to register for VAT will be reviewed upwards to
N50,000 for the first month of default and N25,000 for each subsequent
month of default.
The penalty for failure to notify FIRS of change in company address will
be reviewed upwards to N50,000 for the first month of default and
N25,000 for each subsequent month of default. This penalty also covers
failure to notify FIRS of permanent cessation of trade or business.
Similar to the VAT amendment, the bill is also introducing Capital Gains
Tax (CGT) exemption on Group reorganisations, subject to the following
conditions being met.
They are:
The current practice is that companies send an approval request
letter under CITA S29(9) to the FIRS, and include a CGT exemption
request. Currently, the CGT Act imposes CGT on compensation for loss of
employment above N10,000.
The bill seeks to expand the coverage of this provision by renaming it
“compensation for loss” and increase the minimum threshold from N10,000
to N10 million.
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