Food Items, Pads, Others Get VAT Exemption
About 20 basic food items, locally manufactured sanitary towels, pads and tuition fees relating to nursery, primary, secondary and tertiary education have been added to the exemption list of goods and services on the VAT under the Finance Law.
A statement by Senior Special Assistant to the President on Media & Publicity, Office of the Vice President, Laolu Akande, said this was part of efforts to ensure that the cost of living did not rise for Nigerians because of the changes in the Value-Added Tax.
The new Act raised Value Added Tax from five per cent to 7.5 per cent.
“To allay fears that low-income persons and companies would be marginalised by the new law, reduce the burden of taxation on vulnerable segments, and promote equitable taxation, the Finance Act 2019 had extended the list of goods and services exempted from VAT, it stated.
The statement gave the additional exemptions as, “Basic food items –additives (honey), bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried), live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, water (natural water and table water).
“Locally manufactured sanitary towels, pads or tampons.”
The statement said it included services rendered by microfinance banks, tuition fees relating to nursery, primary, secondary and tertiary education.
Among other benefits, the statement said the law would consolidate efforts already made in creating the enabling environment for improved private sector participation and contribution to the economy as well as boost states’ revenues.
The Federal Government stated, “The Finance Act will support the funding and implementation of the 2020 budget. We shall sustain this tradition by ensuring that subsequent budgets are also accompanied by a finance law.”
It stated that the new Act was the first legislation created to accompany an Appropriation Act since the return of democracy in 1999.
According to the Presidency, Nigeria’s increased new VAT rate of 7.5 per cent was still the lowest in Africa, and one of the lowest anywhere in the world.
It stated that South Africa’s VAT was 15 per cent; Ghana; 12.5 per cent; Kenya, 16 per cent; Egypt, 14 per cent; Rwanda, 18 per cent; and Senegal had18 per cent.
Under Nigeria’s revenue sharing formula, 85 per cent of collected VAT would go to states and local governments.
This meant that the bulk of additional VAT revenues accruing from the increase will go towards enabling states and local governments to meet their obligations to citizens, including the new minimum wage as already noted by state governors, it said.
Before now, the Buhari administration had resisted previous suggestions to raise VAT.
The new Finance Act exempted businesses with turnover below N25m from VAT payment, it said.
While explaining the Companies Income Tax, it stated that under the new law, companies with less than N25m in annual turnover were charged zero CIT.
The CIT for companies with revenues between N25m and N100m (described in the Act as “medium-sized” companies) had been reduced from 30 per cent to 20 per cent, it added.
It said that large companies with annual turnover greater than N100m would continue to pay the standard 30 per cent CIT
The new Act included a provision that granted all companies “engaged in agricultural production” in Nigeria “an initial tax-free period of five years”, renewable for an additional three years.
It added that the new Act provided incentives to promote tax compliance through bonus reductions in the CIT for early remittance.