The Finance Bill 2020 has been enacted into law by President Buhari on December 31st 2020, taking effect from 1st January 2021. It has made over 80 amendments to 14 different laws following hot on the hills of the Finance Act 2019 which came into force on 13th January 2020. The Act has made several reforms to some tax and regulatory laws in the country; it has even included certain incentives towards the recent COVID-19 pandemic. In this article, we will be examining the significant changes the Act has made to variouslaws in Nigeria.

Changes to the Personal Income Tax Act (‘PITA’)

  • Redefining gross income for PAYE tax purposes. Section 33 (2) of the PITA was substituted with the following:

“For the purposes of this section, “gross income” means income from all sources less all non-taxable income, income on which no further tax is payable, tax-exempt items listed in paragraph (2) of the Sixth Schedule and all allowable business expenses and capital allowances”.

The idea behind this is to prevent a situation where non-taxable income (such as reimbursable, employer’s contribution to pension), franked investment income (such as dividend) and tax-exempt items are considered in the computation of Consolidated Relief Allowance (CRA).

  • Re-introduction of life assurance premium tax relief. The newly re-introduced subsection 3 of 33 states:

“There shall be allowed a deduction of the annual amount of any premium paid by the individual during the year preceding the year of assessment toany insurance company in respect of insurance on his life or the life of his spouse, or of a contract for a deferred annuity on his own life or the life of his spouse”.

  • The Act also mandates that Schemes or Societies, to which contribution to a pension, provident and retirement benefits fund is made to, should be recognized under the Pension Reform Act.
  • The Finance Act introduced a proviso to Section 37 of PITA which provides that minimum tax under its section as provided for under the Sixth Schedule to this Act shall not apply to a person in any year of assessment where such a person earns the National Minimum Wage or less from such employment.

In other words, any individual earning National Minimum Wage which is N360,000 annually or less is exempted from payment of personal income tax.

  • Introduction of the concept of Significant Economic Presence (SEP) to Personal Income Tax.

Changes to the Companies Income Tax Act (‘CITA’)

  • Minimum tax for companies in respect of returns for years of assessments due between 1st January 2020 and 31st December 2020 has been reduced from 0.5% to 0.25% of gross turnover less franked investment income.
  • FIRS may prescribe the form of accounts other than audited financial statements form small and medium companies.
  • Service of notice of assessment and objections may be done by courier service, email or other electronic means as may be directed by the FIRS in a notice. Tax Appeal Tribunal may conduct its hearing remotely via virtual means, using such technology or application as may be necessary to ensure fair hearing.
  • Public character for the purpose of tax exemption requires an organization or institution to be registered in accordance with relevant laws in Nigeria and does not distribute or share its profits in any manner to members or promoters.
  • For companies operating in Free Trade Zones, exemption from taxes is subject to compliance with tax filing and returns obligation to the FIRS under Section 55 (1) of CITA.

Changes to the Stamp Duties Act

  • The introduction of a one-off levy of N50 known as the Electronic Money Transfer Levy on electronic Money Transfer Levy on electronic transfers and deposits of money in the sum of N10, 000 or more to replace the imposition of Stamp Duties on such transfers. This levy is to be accounted for by the person to whom the transfer or deposit is made and will be distributed between the Federal and State Government on a derivation basis of 15% and 85% respectively.

Changes to the Federal Inland Revenue Service Act

  • There is a requirement for Federal Inland Revenue Service (FIRS) to utilize adhesive stamp produced by the Nigerian Postal Service when denoting documents by adhesive stamp.
  • Requirement for companies operating in the Free Trade Zones to file returns with the FIRS.
  • Accountant General for the Federation to open dedicated accounts for each tax type for the payment of tax refunds to be administered by the FIRS and fund based on annual budgets for tax refund for each tax-type as may be approved by the National Assembly.

Changes to the Value Added Tax Act

  • Exclusion of land and buildings, money and securities from the definition of goods and services for VAT purposes.
  • A non-resident that makes a taxable supply to Nigeria is required to register for tax and obtain TIN, include VAT on its invoice, and may appoint a representative in Nigeria for the purpose of its tax obligations.
  • Exemption of commercial airline ticket from VAT, and hire or lease of agricultural equipment for agricultural purposes.
  • Exclusion of land and buildings, money and securities from the definitions of goods and services for VAT purposes.

Changes to the Capital Gains Tax Act

  • Compensation for loss of office up to N1 million exempted from Capital Gains Tax. Tax due on excess above N10 million is to be deducted by the payer and remitted within the time specified under the PAYE Regulations.

Changes to the Tertiary Education Trust Fund Act

  • Exemption of small companies with less than BN25 million turn-over from payment of Tertiary Education Tax.

Changes to the Industrial Development (Income Tax Relief) Act

  • A small or medium company engaged in primary agricultural production may be granted pioneer status for an initial period of 4 years and an additional 2 years (making 6 years in total).

Customs & Excise Tariff (Consolidation) Act

  • Downward review of excise duty rates on tractors and motor vehicles for transportation as well as duty-free importation of aircrafts and its parts for commercial airlines in Nigeria.
  • Introduction of excise duty on telecommunication charges at a rate to be prescribed in the law or an order issued by the President.
  • Reduction of import duty on tractors from 35% to 10% and reduction of import levy n cars from 30% to 5%.

Changes to the Companies and Allied Matters Act

  • Unclaimed dividends ina listed company and unutilized amounts in a dormant bank account outstanding for 6 years or more to be transferred to the Unclaimed Funds Trust Fund as a special debt to the Federal Government to be managed by the Debt Management Office and shall be available to the shareholder or account holder at any time together with the yield thereon.
  • Balance of operating surplus of a corporation shall be paid to the CRF of the Federation on a quarterly basis.

Changes due to the COVID -19 Pandemic

  • Deductibility of donations made in cash or in kind to the government in respect of any pandemic or natural disaster to a maximum of 10% of assessable profit after other allowable donations.

In conclusion, based on all the new amendments to the Finance Act, some of which are actually geared towards meeting the demands of socio-economic changes, it is advisable that both existing and prospective business owners should seek to understand the provisions of the Finance Act and the implications on how business is to be conducted in Nigeria going forward. In other words, since every new law has its opportunities, as well as its challenges, it is expedient that interested investors examine critically the impact of the amendments and make the required adjustments needed, especially as regarding payroll tax calculators.



Matthews, M. 2021, (January 6).  President Buhari Signs the Finance Bill, 2020 into law. Andersen Tax.

Obayomi, W. 2021, January 6. President Signs the Appropriation Bill, 2021 and Finance Bill, 2020.  Proshare.–2021-and-Finance-Bill–2020/55059

20 Key Changes in the New Finance Act, 2020 You Should Be Aware Of. (2021, January 6). Pwc Nigeria.

Finance Act 2020 and its Impact on Employment Tax. (2021, January 6). Deloitte.

 Olajumoke Ogunfowora









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