The Finance Act 2024 continues Nigeria's tax reform agenda, introducing new measures to boost revenue, enhance compliance, and align the tax system with economic realities. This guide covers the key changes and their implications for businesses operating in Nigeria.
Overview of Finance Act 2024
Legislative Context
Finance Act 2024 builds on previous reforms:
- Continues Revenue mobilization efforts
- Addresses economic challenges
- Implements policy initiatives
- Closes identified loopholes
Key Themes
| Theme | Focus |
|---|
| Revenue enhancement | Broadening the tax base |
| Compliance improvement | Simplified processes |
| Economic support | Targeted incentives |
| International alignment | OECD/BEPS implementation |
Major Tax Changes
Company Income Tax Updates
Rate Structure Confirmation
The tiered structure continues:
| Category | Turnover | Rate |
|---|
| Small company | ≤ ₦25 million | 0% |
| Medium company | > ₦25M to ₦100M | 20% |
| Large company | > ₦100 million | 30% |
New Provisions
| Change | Details |
|---|
| Definition clarity | Clearer small company criteria |
| Connected companies | Anti-fragmentation rules |
| Threshold indexation | Potential future adjustments |
Loss Utilization
| Aspect | Provision |
|---|
| Carry forward | Unlimited years |
| Annual limit | 50% of assessable profit |
| Small company | No minimum tax if loss |
VAT Modifications
Registration and Rates
| Element | Status |
|---|
| Standard rate | 7.5% (unchanged) |
| Registration threshold | ₦25 million |
| Voluntary registration | Permitted below threshold |
New Exemptions
Additional exempt items may include:
- Essential commodities
- Healthcare inputs
- Educational materials
- Agricultural equipment
Digital Economy VAT
| Provision | Impact |
|---|
| Non-resident suppliers | Registration or withholding |
| Digital platforms | Compliance obligations |
| Collection mechanisms | Enhanced enforcement |
Withholding Tax Adjustments
Rate Clarifications
| Payment Type | Rate | Notes |
|---|
| Rent | 10% | Immovable property |
| Dividends | 10% | Subject to treaties |
| Interest | 10% | Financial institutions exempt on receiving |
| Royalties | 10% | Technical know-how included |
| Professional fees | 10% | Services covered |
| Contracts | 5% | Goods and construction |
Administrative Updates
| Change | Details |
|---|
| Certificate timeline | 21 days after deduction |
| Electronic filing | Mandatory |
| Penalty enforcement | Stricter compliance |
Personal Income Tax
Rate Table
No changes to the graduated rates:
| Band | Rate |
|---|
| First ₦300,000 | 7% |
| Next ₦300,000 | 11% |
| Next ₦500,000 | 15% |
| Next ₦500,000 | 19% |
| Next ₦1,600,000 | 21% |
| Above ₦3,200,000 | 24% |
Relief Updates
| Relief | Current |
|---|
| Consolidated Relief Allowance | ₦200,000 or 1% of gross income + 20% of gross |
| Pension contribution | 8% employee, 10% employer |
| NHF | 2.5% of basic |
Tertiary Education Tax
Rate Progression
| Period | Rate |
|---|
| Previous | 2.5% |
| Current/Phased | Moving toward 3% |
Note: Implementation timeline and specific rates should be confirmed with NRS (Formerly FIRS).
Sector-Specific Provisions
Technology and Digital Economy
Significant Economic Presence
| Criterion | Application |
|---|
| Digital transactions | Revenue threshold with Nigeria |
| User base | Significant Nigerian users |
| Platform presence | Active Nigerian engagement |
Digital Services Tax
| Element | Treatment |
|---|
| Applicable services | Specified digital services |
| Tax basis | Revenue from Nigerian sources |
| Compliance | Registration or withholding |
Financial Services
| Provision | Details |
|---|
| Banking | Specific taxation rules |
| Insurance | Premium tax provisions |
| Securities | Transaction levies |
Real Estate
| Transaction | Tax Treatment |
|---|
| Property sales | CGT at 10% |
| Rental income | Income tax + WHT on payment |
| Property development | VAT considerations |
Agriculture
| Incentive | Benefit |
|---|
| New agribusiness | CIT exemption period |
| Equipment | 95% capital allowance |
| Inputs | VAT exemption |
Manufacturing
| Support | Details |
|---|
| Pioneer status | Tax holiday eligibility |
| Export incentives | Various schemes |
| Local content | Incentives for localization |
International Tax Provisions
Transfer Pricing
| Requirement | Details |
|---|
| Documentation | Mandatory for related party transactions |
| Arm's length standard | Required pricing basis |
| Country-by-country reporting | Threshold-based requirement |
| Advance pricing agreements | Available option |
Thin Capitalization
| Element | Provision |
|---|
| Debt-to-equity ratio | 2:1 limit (related party) |
| Interest restriction | Excess interest non-deductible |
| Exceptions | Financial institutions |
Treaty Provisions
| Aspect | Treatment |
|---|
| WHT rates | May be reduced by treaties |
| Double taxation relief | Credit method |
| Information exchange | Automatic exchange provisions |
Tax Administration
| Initiative | Status |
|---|
| TaxPro Max | Enhanced functionality |
| E-filing | Mandatory for most taxpayers |
| E-payment | Required channels |
| Data analytics | Increased use |
Compliance Enhancement
| Measure | Impact |
|---|
| Third-party reporting | Banks, telcos, etc. |
| Data matching | Automated verification |
| Risk-based audit | Targeted examinations |
Penalties Update
| Offense | Penalty |
|---|
| Late filing | ₦50,000 first month + ₦25,000/month |
| Late payment | 10% + interest |
| Non-registration | ₦50,000 + ₦25,000/month |
| False returns | Criminal penalties possible |
Stamp Duties
Key Provisions
| Instrument | Rate |
|---|
| Share transfer | 0.75% |
| Debentures | 0.375% |
| Lease | Based on annual rent |
| Electronic transfers | ₦50 (above ₦10,000) |
Administration
| Change | Details |
|---|
| Self-assessment | For most instruments |
| Electronic stamping | Available |
| Compliance checks | Enhanced |
Tax Incentives
Available Incentives
| Incentive | Eligibility |
|---|
| Pioneer status | Qualifying industries |
| Export incentives | Manufactured exports |
| Free trade zones | Zone operators |
| Infrastructure | Road, power projects |
Application Process
| Step | Action |
|---|
| 1 | Identify applicable incentive |
| 2 | Meet eligibility criteria |
| 3 | Apply to relevant authority |
| 4 | Obtain approval |
| 5 | Comply with conditions |
Compliance Calendar Impact
Updated Deadlines
Standard deadlines remain:
| Tax | Deadline |
|---|
| VAT | 21st of following month |
| WHT | 21st of following month |
| PAYE | 10th of following month |
| CIT | 6 months after year-end |
| Annual PAYE returns | January 31 |
New Reporting
| Requirement | Frequency |
|---|
| Transfer pricing declaration | Annual with CIT |
| Country-by-country report | If applicable |
| Beneficial ownership | As required |
Planning Considerations
Strategic Responses
| Area | Consideration |
|---|
| Corporate structure | Optimal entity setup |
| Financing | Debt/equity mix |
| Transfer pricing | Documentation readiness |
| Technology | Digital tax compliance |
Compliance Priorities
| Priority | Action |
|---|
| 1 | Understand applicable changes |
| 2 | Update systems and processes |
| 3 | Train relevant staff |
| 4 | Review contracts/agreements |
| 5 | Engage advisors if needed |
Impact Assessment
By Business Size
Small Businesses (≤ ₦25M turnover):
- Continue enjoying 0% CIT
- VAT registration if threshold crossed
- Simpler compliance burden
Medium Businesses (₦25M - ₦100M):
- 20% CIT rate continues
- Full compliance requirements
- WHT deduction obligations
Large Businesses (> ₦100M):
- 30% CIT rate
- Full compliance suite
- Transfer pricing requirements
- Enhanced documentation
By Sector
| Sector | Key Impacts |
|---|
| Technology | Digital economy provisions |
| Financial services | Specific tax rules |
| Manufacturing | Incentive opportunities |
| Agriculture | Continued exemptions |
| Real estate | CGT and VAT considerations |
How Finora Adapts to Finance Act Changes
Automatic Updates
| Feature | Benefit |
|---|
| Rate tables | Current rates applied |
| Threshold monitoring | Alerts for category changes |
| Calculation rules | Finance Act compliant |
Compliance Support
Finora helps with:
- CIT computation at correct rate
- VAT calculations
- WHT tracking and certificates
- PAYE using current reliefs
Reporting
| Report | Value |
|---|
| Tax computations | Ready for filing |
| Compliance dashboard | Status visibility |
| Deadline tracking | Never miss a date |
Documentation
| Capability | Benefit |
|---|
| Transaction records | Transfer pricing support |
| Audit trail | Examination readiness |
| Export options | Advisor collaboration |
Frequently Asked Questions
When does Finance Act 2024 take effect?
Provisions typically take effect from the date of presidential assent, unless specific commencement dates are stated. Check official gazettes for confirmation.
How do I know if new provisions affect my business?
Review your turnover, industry, and transaction types against the Finance Act provisions. Consult with tax advisors for complex situations.
Will there be further changes?
Finance Acts are passed annually. Expect continued refinements to the tax system. Stay updated through official channels and professional advisors.
How should I prepare for these changes?
Review your current compliance position, update accounting systems, ensure staff are aware of changes, and engage professionals for complex areas.
Are there transitional provisions?
Some changes may have transitional arrangements. Review specific provisions or consult NRS (Formerly FIRS) guidance for details.
Conclusion
Finance Act 2024 continues Nigeria's tax evolution:
Key Takeaways:
- CIT rate structure continues with 0%/20%/30% tiers
- VAT remains at 7.5% with evolving digital provisions
- WHT rates and compliance emphasized
- International tax rules strengthened
- Administration increasingly digital
Business Actions:
- Understand how changes affect you
- Update compliance processes
- Maintain proper documentation
- Plan for tax efficiency
- Stay informed of developments
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