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Implementation of the Finance Act 2020: what arbitrators, other professionals must know

On January 13, 2020, the President of the Federal Republic of Nigeria signed the finance bill into law. The finance bill is a welcome development, as it seeks to reflect the economic heights Nigeria hopes to attain in the comity of nations. It is imperative to understand the practical points the government hopes to achieve with the finance law as full implementation begins.

The finance law has five strategic objectives in terms of achieving incremental, but necessary, changes to our fiscal laws. These are: promoting fiscal equity by mitigating instances of regressive taxation; reforming domestic tax laws to align with global best practices; introducing tax incentives for investments in infrastructure and capital markets; supporting micro, small and medium sized businesses in line with our ease of doing business reforms; and raising revenue for the government.

There are key ingredients of the finance law that the Nigerian citizenry should take note of, part of which is the increment on the Value Added Tax (VAT). Businesses in Nigeria with a turnover of less than Twenty-Five Million Naira (N25,000,000) will not be taxed under the finance law. Also, some food items have been exempted from the new Value Added Tax including Brown and White Bread, Cereals, including maize, rice, wheat, millet, barley, and sorghum, fish of all kinds, flour and starch meals, fruits, nuts, pulses and vegetables of various kinds. Others are: roots such as yam, cocoyam, sweet and Irish potatoes, meat and poultry products including eggs, milk, salt, herbs of various kinds, and natural and table water.

The implications of the increment in Value Added Tax (VAT) are that it may set off inflationary tendencies and create administrative complexities. On a brighter note, there are a lot of advantages the 2019 finance law can achieve in due time, one of which is; to help bring about a better-balanced tax system and reduce obstacles to export, under certain conditions. In accordance with the provisions of the Finance Bill, small businesses with turnover of less than N25,000,000 (Twenty-Five Million Naira) will be exempted from Company Income Tax, while a lower Company Income Tax Rate of twenty percent (20%) will apply to medium-sized companies with turnover between N25,000,000 (Twenty Five Million Naira) and N100,000,000 (One Hundred Million Naira).

In summary, other implications of the amendments for Arbitrators, legal practitioners, and other members of the public, are as follows; compensation for loss of employment below N10,000,000 (Ten Million Naira) to be exempted from Company Gains Tax; Email correspondences to be recognized for communicating with tax authorities; Insurance Companies can now carry forward tax losses indefinitely, deduct reserve for unexpired risks on time apportionment bases while special minimum tax for insurance has been abolished. Stamp duty on bank transfer to apply only on amount from N10,000 and above, and transfers between the same owner’s accounts in the same bank are also to be exempted. It is noteworthy to state that the meaning of supply and the definition of goods has been expanded to cover intangible items other than land, amongst other amendments.

Members of the public may be awakened to the fact that opening of bank accounts will be impracticable following the provisions of the finance law, as Tax Identification Number is a prerequisite for opening a bank account in Nigeria.


Tax disputes may arise as a result of taxpayers being aggrieved by a number of issues. Such issues may be concerned with inaccuracy of filing of tax returns by tax authorities, interpretation of the finance law. For example, where there are inconsistencies regarding the interpretation of the finance law, disputes are practically unavoidable. In the same vein, if a taxpayer is aggrieved, the concerned parties may institute an action through arbitration amongst other alternative dispute mechanisms. Thus, it is important that taxpayers are abreast of the dispute resolution process in Nigeria and the options available to them as speedy resolution of tax and commercial disputes is key to business growth.



Shola Oshodi-John, Timi Olagunju and Oden Oonu


This publication is a product of The Research Unit of the Nigerian Institute of Chartered Arbitrators (NICArb).

Shola Oshodi-John, FCArb; Timi Olagunju Esq. (Editorial); FCArb; Oden Oonu Esq. are of the Nigerian Institute Of Chartered Arbitrators (NICArb)



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