Finance Act 2023

Finance Act 2023

The Finance Act 2023: What you should know

The Finance Act 2023 (“the Act”) was enacted on 28th May, 2023 when the President of the Federal Republic of Nigeria signed the Finance Bill earlier passed by the National Assembly into law. The Act amends some of the provisions of existing tax statutes such as:

  • The Companies Income Tax Act (CITA)
  • The Capital Gains Tax Act (CGTA)
  • The Tertiary Education Tax (TET) Act
  • The Customs, Excise Tariff, Etc. (Consolidation) (CET) Act
  • The Personal Income Tax Act (PITA)
  • The Petroleum Profits Tax Act (PPTA)
  • The Value Added Tax (VAT) Act,
  • The Stamp Duties Act (SDA)
  • The Corrupt Practices and Other Related Offences Act
  • The Ministry of Finance Incorporated Act; and
  • The Public Procurement Act.

Further to the above, the Federal Inland Revenue Service has issued a Public Notice published on 13th June, 2023 (“the Public Notice”) notifying the general public that certain amendments introduced under the Act will be implemented as from 1st July, 2023. In this piece, we have highlighted some of the salient things you need to know about the Finance Act 2023, the Public Notice and some of the key amendments introduced under the Act:

1.     Companies Income Tax Act (CITA):

  • 10% investment allowance on qualifying capital expenditure incurred on plant and equipment has been repealed. The FIRS stated in the Public Notice that investment allowance are no longer available for tax returns becoming due in respect of  accounting period ending on or after 1st July, 2023.
  • Rural investment allowances erstwhile granted to companies operating in rural areas subject to certain criteria stipulated under CITA has been deleted.
  • Income tax exemption on 25% of incomes in convertible currencies derived from tourists by companies engaged as hoteliers (subject to certain conditions) has been removed. The FIRS stated in the Public Notice that this incentive will no longer be available for tax returns becoming due in respect of the accounting period ending on or after 1st July, 2023.
  • Non-resident shipping and air transport companies that fail to file separate audited financial statements on their business operations in Nigeria are now required to submit a comprehensive gross revenue statement of their Nigerian operations for the relevant period. Such statement must be endorsed by an external auditor and supported with all invoices issued for the relevant period. Furthermore, regulatory agencies are mandated to request evidence of income tax filing and tax clearance certificates from shipping and air transport companies before processing and approving their business approvals and permits.

2.    Value Added Tax (VAT) Act:

  • An importer of goods purchased online, from a non-resident supplier who has been appointed by the tax authority to collect VAT, is required to provide proof of such appointment and VAT charged on the invoice as a condition for clearing the goods with the Nigerian Customs Service without any further VAT payment.
  • The amendment of the definition of the term “building” to exclude fixtures or structures that can easily be removed such as radio or television masts, transmission lines, cell towers, vehicles, mobile homes, caravans and trailers. The FIRS has stated that this amendment will be implemented from 1st July, 2023.
  • The due date for filing returns on VAT withheld at source by taxpayers appointed by the FIRS as VAT collection agents is now the 14th day of the month following the month of the relevant transaction. The FIRS has stated that this amendment will be implemented as from 1st July, 2023.
  • The Act gives FIRS powers to disregard any disposition and make adjustments where it is of the view that a transaction is artificial or fictitious and will invariably reduce the tax payable.

 3.    Capital Gains Tax (CGT) Act:

  • Digital assets including cryptocurrencies non-fungible tokens and other tokenized assets are now recognized as chargeable assets under the CGTA. Gains derived from disposal of such assets are now taxable under the CGTA at the rate of 10%.
  • Capital losses on chargeable assets under the CGTA are tax deductible against chargeable gains on the same class of asset. Unutilized capital losses may be carried forward for a maximum of 5 years.
  • It is now possible to claim roll-over relief on proceeds of disposal of shares and stocks provided such proceeds are reinvested within the same year of assessment.

4.    Tertiary Education Tax (TET) Act:

  • TET rate is now increased from 2.5% to 3% of assessable profit. The FIRS has stated that this amendment will be implemented as from 1st July, 2023.

5.     Personal Income Tax Act (PITA):

  • Premium paid to an insurance company in respect of a contract for deferred annuity for an individual or his/her spouse is now an allowable deduction under PITA subject to a minimum holding period of 5 years. Any portion of the deferred annuity withdrawn within the 5 years minimum holding period stipulated in the Act will be subjected to Personal Income Tax.

6.    Upstream and Midstream Operations:

  • Decommissioning and abandonment contribution by an upstream company to a fund, scheme, or arrangement approved by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is now an allowable deduction for PPT purposes subject to the provision of a Statement of Account of the fund.
  • Like those operating in the manufacturing sector, companies engaged in upstream and midstream gas operations are entitled to fully relieve their capital allowances against their assessable profits without restricting the capital allowance claimable to 2/3rd of assessable profit. However, the tax written down value of the assets on which such capital allowance is claimable will be net of investment allowance already claimed on such assets.
  • Late filing penalty is now NGN 10 million for the first day of default and NGN2 million for each day the default continues.
  • Default in compliance with the provisions of the PPTA now attracts an administrative penalty of NGN 10 million in the first month of default where no specific penalty is provided and NGN 2 million, or such sum as may be approved by the Minister of Finance, for each day the default continues. These amendments will be applicable to companies that are yet to convert to the Petroleum Industry Act regime.
  • The basis for the determination of chargeable oil price under the PPTA has now been aligned with the fiscal provisions of the Petroleum Industry Act (PIA).

7.     Customs, Excise Tariff, Etc. (Consolidation) (CET) Act:

  • A levy of 0.5% is imposed on all eligible goods imported into Nigeria from outside Africa. The levy is meant to be a source for financing capital contributions, subscriptions and other financial obligations to the Africa Union, African Development Bank, Africa Export-Import Bank, ECOWAS Bank for Investment and Development etc., and other multilateral institutions as may be designated by the Minister.
  • Telecommunication services and all other services provided in Nigeria will be liable to excise duties at rates that may be prescribed by the President through an Order.

8.    Stamp Duties (SD) Act:

  • The sharing formula for Electronic Money Transfer levy is now as follows:

Federal Government – 15%

State Governments – 50%

Local Governments – 35%

Our Comments

  • As a growing economy that yearns for more local and foreign direct investment, the repeal of investment allowance claimable on plant and equipment under CITA is an amendment that should be revisited by policymakers and relevant stakeholders. Admittedly, investment allowance incentive has been abused in prior years due to indiscriminate claims of investment allowance on items that, in the strict sense, cannot be categorized as “plant” or “equipment”. However, the panacea for this anomaly is not an outright repeal of investment allowance – especially not in the country’s current economic climate. By way of recommendation, a more solution-driven legislative strategy will be to introduce a specific and more stringent definition for assets that would qualify as “Plant” and “equipment” for the purpose of claiming investment allowance. A cap or threshold for the qualifying capital expenditure to be incurred at the point of acquisition of such asset can also be introduced.
  • Removal of Rural Investment Allowance may also affect the pace of growth and development of rural areas.
  • It is also observed that some of the amendments introduced were aimed at harmonizing the provisions of applicable tax laws, including the PIA.
  • The powers vested in the FIRS based on the amendments newly introduced to the VAT Act bring the “arms-length principle” of transfer pricing into the purview of VAT compliance.
  • The actual commencement date of the Act is unclear. The Finance Bill was signed into law on 28th May, 2023 and the effective date designated under the Act is 1st May, 2023. This uncertainty is further exasperated by the Public Notice indicating that certain provisions of the Act will “take effect from 1st of July, 2023”. Given the radical amendments introduced under the Act, it is important for taxpayers to know with certainty, the exact date the change in their tax position occasioned by amendments introduced by the Act will be effective.

Please click here to access the Public Notice. Also, you can click here to access the Finance Act 2023.

For further discussion on the above, contact us at or

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