Finance Act 2023 – Impacts On The Nigerian Tax System

It is no longer news that on May 28, 2023 the former President of Nigeria His Excellency Mohammadu Buhari signed the Finance Act 2023.

OnJuly 6, 2023 the current President His Excellency President Bola Ahmed Tinubu GCFR signed the Finance Act (Effective date variation) order 2023 which placed the commencement date of the Act as September 1, 2023.

The Act introduced changes to Capital Gains Tax (CGT) Act, Companies Income Tax (CIT) Act, Personal Income Tax (PIT) Act, Custom and Excise Tariff (Consolidation) Act(CETA), Value Added Tax (VAT) Act, Petroleum Profit Tax (PPT) Act, Stamp Duties Act (SDA), Tertiary Education Trust Fund (Establishment) Act, Corrupt Practices and Other Related Offences (CPORO) Act, Public Procurement Act(PPA), and the Ministry of Finance (Incorporated) (MOFI) Act. The 2023 Finance Act also made slight modifications to its predecessors, Finance Act 2019, 2020 and 2021.

The changes introduced by the Act are intended to improve tax revenue, align changes in the prior Acts to ensure tax equity and consistency, reform Nigeria tax incentives regime for companies and improve tax administration.

This article presents a simple analysis of the changes introduced by the 2023 Finance Act into the Nigerian tax system.

Changes Introduced by 2023 Finance Act

1. Applicable Taxable Period:

The effective date of the Finance Act 2023 is 1st September, 2023. The question therefore, is what happens to transactions which took place before 1st September, 2023 especially for organizations whose accounting year end spans beyond September 1st. In this situation, the provision of the Revised National Tax Policy (NTP) 2017 should come handy. It states that tax policies and laws shall not be retroactive i.e. the application should be for the future only and should not change the law from what it was before the effective date. This, therefore, implies that all transactions that occur prior to 1st September, 2023 would not be affected by Finance Act 2023, while events happening thereafter would be subject to its provisions. This will result in apportionment of profits between pre and post 1st September, 2023 for income tax purposes.

2. Capital Gains Tax Act (CGTA), Cap C1, Laws of the Federal Republic of Nigeria (LFN), (as amended): The major impacts of the Finance Act on CGT are:
Imposition of CGT on digital assets. The Act amended section 3(a) of CGTA to include digital assets e.g. crypto currency as part of chargeable assets for CGT purposes. Proceeds derived from disposal of digital assets are now liable to 10% CGT.
Exclusion of capital losses: the Act amended section 5 of CGTA to allow capital losses to be set off against gains. Note that prior to the enactment of the Finance Act 2023, losses on disposal of any chargeable assets were not tax deductible in computing the chargeable gains. However, for such losses on disposal to be tax deductible, such losses shall be attributable to the same asset(s) within the same class in a taxable year. Again, unabsorbed losses may also be carried forward to be set off from gains realized from the same class of asset for a maximum of 5 years immediately following the year the loss was incurred.

3. Foreign currency income earned by hotels from tourists would no longer be exempted from income tax. Note that previously 25% of such foreign currency income was exempted from tax if the amount was set aside in a dedicated/reserve fund and used for expansion of the physical infrastructure of the business within 5 years.

4. The Finance Act 2023 requires international shipping and air transport companies that fail to provide audited financial statements while filing their CIT to submit a comprehensive gross revenue statement of their Nigerian operations for the specified period, endorsed by a director of the company and an external auditor and supported with all invoices issued to relevant customers.
Section 14(6) was introduced in the CGTA which mandates regulatory agencies to request evidence of income tax filing and tax clearance certificate from shipping and air transport companies before processing and granting business approvals and permits or allowing them to continue to carry on business in Nigeria.

5. Personal Income Tax Act (PITA), cap P8 Laws of the Federation (LFN) 2004 (as amended): Finance Act 2023 re-introduced the provision that allow as deduction for tax, the premiums paid or payable on contract for deferred annuities. This is however, restricted to premiums with a minimum of 5 years holding period. Note that this provision was earlier disallowed by Finance Act 2021.


6. Petroleum Profit Tax Act (PPTA) Cap C4, LFN, 2004 (as amended):
Companies in pre-production phase are required to submit tax returns within 18 months from the date of incorporation for a new company, and 5 months after year end in other cases.
Decommissioning and abandonment contribution by an upstream company to a fund, scheme or arrangement approved by the Nigerian Upstream Petroleum Regulatory Commission is to be treated as allowable deduction for PPT purposes subject to the provision of a statement of account of the fund.
Basis for determination of the chargeable crude oil price under PPT Act is now the fiscal oil price per barrel. Where there is no fiscal price for a crude stream, Nigerian Upstream Petroleum Regulatory Commission (NUPRC) shall establish a fiscal price based on fair and reasonable relationship to the established fiscal oil price of the Nigerian crude oil streams of comparable quality and specific gravity.

7. Tertiary Education Trust Fund (establishment etc) Act: The Finance Act 2023 increased Tertiary Education Trust Fund rate for companies, excluding small companies(as defined in CITA) from 2.5% to 3%.

8. Value Added Tax Act (VATA), Cap VI, LFN 2007:
As provided in CITA, PITA, CGTA and PPTA, the Finance Act 2023 included a provision in the VATA which gives the FIRS or the service powers to disregard transactions that are in its opinion, artificial or fictitious or generally not carried out at arm’s length in the case of related party transactions. Note that such adjustments are appealable.
While Finance Act 2021 provided for appointment of any person as tax agent for VAT who are required to remit the tax so collected before the 21st day of the following month, the Finance Act 2023 provides that such VAT collected should be remitted to FIRS on or before 14th day of the following month.
Finance Act 2023 amended the definition of building for VAT purposes as follows: “Building means any structure permanently affixed to land for all or most of the useful life of that structure and shall include without limiting the generality of the foregoing, a house, garage, dwelling apartment , hospital and institutional building, factory, warehouse, theatre, cinema, store, mill building and similarly fixed structure affording protection and shelter, but excludes any fixtures or structures that can easily be removed from such land such as radio and television masts, transmission lines, cell towers, vehicles, mobile homes, caravans and trailers”. Note that VAT is not applicable on the sale/transfer of buildings or interest on buildings, because VAT is only applicable on the supply of goods and services in Nigeria.

9. Finance Act 2s023 expanded the scope of excise duties to include “all services including but not limited to telecommunication services provided in Nigeria.” The Act also charges the Minister of Finance with the responsibility for the Supervision of the Tariff Review Board i.e. the Board responsible for the review of customs and excise tariffs under CETA.


10. Stamp Duties Act (SDA), CapS8, LFN, 2004 (as amended): Finance Act 2023 provides a new allocation formula for Electronic Money Transfer (EMT) levy as follows: Federal Govt. – 15%, State Govts. – 55%, Local Govts. – 35%.

In conclusion, the enactment of the Finance Act 2023 obviously was aimed at improving the country’s fortunes, boost investors’ confidence and continue to lead the country on the path of consolidation and sustainable growth. The information in this article is obviously not conclusive or all encompassing. You may therefore get a copy of the 2023 Finance ACT for more understanding.

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