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The Finance Act (FA) 2021 in its annual fashion is the latest edition of the law to demonstrate the nation’s continued commitment to financial and economic growth. It also reflects the will of the government to bring our tax laws at par with modern best practices, bearing in mind our distinct economic realities. Presented last year, the Act was signed into law by President Muhammadu Buhari on the 31st December 2021. The idea is to phase-out leakages in our tax laws and creates an enabling environment that improves the country’s fiscal and economic outlook.

Essentially, the FA 2021 makes amendments to (12) extant legislation inclusive of tax laws and other principal statutes. As always, these reforms are introduced to engender economic stability, increase revenues, promote investment opportunities and assist the government in addressing contemporary issues among others. The world is changing; our laws must reflect these changes. So, our focus in this piece is to interpret a couple of those important revisions as encapsulated in the Act.




The Finance Act 2021 amends the CITA thus;

  • Taxation of the incomes/profits of the lottery and gaming business.

Section 2 FA 2021 amends the provision of section 15 CITA to provide for the taxation of incomes and profits derived from lottery and gaming businesses as prescribed under the law. This by any stretch doesn’t suggest that incomes from non-gaming enterprises won’t be taxed. The Act accommodates all other incomes earned by any such company hereunder, in so far as it is a company that primarily undertakes lottery and gaming businesses. Further, the Act provides a list of activities that falls within the ambit of lottery and gaming businesses and points up a few allowable deductions for the determination of assessable profit of which contributions to the Lottery Trust Fund is inclusive.

  • Reductions to the Minimum Tax Rate

The Minimum tax rate stipulated at 0.5% for companies who run at a loss or whose profits are so poorly meagre tax has been further modified by the FA 2021 to 0.25% of such companies annual turnover. As always, this is done to offer reliefs to companies that fall in this category. The reduction is however only available for tax returns filed for any two (2) accounting periods ending either on 1st January 2019 to 31st December 2020 or 1st January 2021 to 31st December 2021.

  • The Gas Utilisation Projects Incentives

Before now, companies engaged in downstream gas utilization projects are open to enjoy incentives such as tax holidays for an initial period of (3) three years, renewable for an additional (2) two years. However, Section 39 CITA has been amended to restrict this relief to only one tax regime. As such, this incentive is now only available to be claimed once by the qualifying business under the new Finance Act.

  • Turnover Tax on NRCs[1] (digital)

Interestingly, the FA 2021 amends S. 30 of the CITA to extend the frontiers already provided under the Finance Act 2020. This is to the effect that turnover of non-resident companies has been subjected to an income tax. A slight difference is that the new law expands this provision to specifically capture non-resident digital companies. Usually, they are required to have a significant economic presence in Nigeria in line with the law.[2] It should be noted, however, that this turnover tax only applies where the FIRS is unable to determine the assessable profit/where such assessable profit is less than what should originally arise from the activities of such digital companies. Further to this, the FIRS shall only charge a fair and reasonable percentage to that part of the turnover (profits) which can be attributable to the digital presence of the companies in question.

  • Companies involved in Educational Activities

Presently, by the new Act, companies engaged in educational activities are now going to be liable to taxes under the law. This is because the phrase ‘educational activities’ has been removed from the provision of S. 23 (1c) which makes mention of items exempted from taxes. Consequently, educational institutions that are profit-oriented would have to pay the CIT.

Extras: “Section 77 Companies Income Tax Act is now substituted with a new provision to allow for the payment of taxes in a lump sum or by instalments provided that such instalment payments are made before the due date. Also, where a company pays its tax (90) days prior, such company shall be entitled to a bonus[3] to be used as a tax credit against future taxes.”



The Finance Act 2021 amends Value Added Tax Act thus;

  • VAT Compliance & Registration.

The FA 21 currently directs non-resident entities that supply valuable goods to the country to charge, collect, and remit VAT to the tax authorities. This obligation shall only extend to their Nigerian counterpart where they fail. They can also appoint a representative to carry out its tax obligations in Nigeria after obtaining a Tax Identification Number (TIN) and registering with the Service.[4] Further to this, the provision of Section 15 VAT Act[5] has been amended to include upstream companies among the groups to fulfil the requirements of the law as regards taxable persons, notwithstanding its turnover.



The Finance Act ’21 makes amendments with respect to PITA thus;

  • Deductions for Life Insurance Premiums.
  1. 33 of PITA is amended to allow for the deductions of life insurance premiums paid by a person to cover his life or that of his spouse, in so far as the premiums comply with the arm’s length principle.
  • Quarterly Returns by Banks; Penalties.

As it stands, Section 49 of PITA has been amended and bankers are no longer required to prepare monthly returns containing relevant information of their new customers; instead, they’re obliged to do this every quarter Failure to comply with this requirement makes them liable for a fine of N1 million for each return not submitted. Similarly, anything done contrary to the general provisions of the Act shall attract a fine of N20, 000 for the first day, and N2, 000 for subsequent days of the default.



The FA 21 makes amendments to the CGTA thus

  • CGT on the disposal of shares.

Section 2 of FA 2021 introduces a 10% Capital Gains Tax on the disposal of shares over N100 million by any individual with a Nigerian company registered under CAMA. This provision will, however not apply in certain situations. For instance, where the proceeds are further reinvested in shares of the same entity within a year of assessment. Also, regulated securities lending transactions and disposals of government securities and trading shares are exempted.



The FA 2021 amends the FISREA thus;

  • Use of 3rd party tech in tax administration.

As it stands, FIRS is now equipped to use 3rd party technologies to automate the assessment of tax administration and the gathering of information provided it gives an upfront of 30 days notice given to the taxpayer. Regardless, the Service reserves the right to either withdraw or grant an extension of the notice thereto. Failure to allow FIRS access attracts a fine of N50, 000 and N25, 000 for each day of default.


Moreover, FIRS is now recognised as the sole agency for the administration, assessment, collection and enforcement of taxes and levies due to the Federal government, or any of its agencies.



The Finance Act makes amendments with respect to the TEFFUND Act thus;

  • Rates and Assessments.

Under the Finance Act, the Tertiary Education Tax payable by Nigerian companies (previously at the rate of 2 per cent) has now received an upgrade. In essence, the new rate for TET is now chargeable at 2.5% on all Companies operating in Nigeria, now payable within 30 days of assessment notice from the FIRS. TET is also no longer an allowable expense for upstream petroleum firms.



  • To provide additional clarity, the Finance Act 2021 amends the Nigeria Police Trust Fund Act to state that the FIRS would be in charge of administering the levy. This is calculated at a rate of 0.005% of a company’s net earnings in Nigeria. Returns on this charge will likewise be paid at least 6 months following the year of assessment, and they will not be tax-deductible.


  • The FA 2021 alters the NASENI (Act) to require commercial businesses with a revenue threshold of $100 million or more in the mobile telecommunications, aviation, ICT, banking, marine, and oil and gas sectors to contribute 0.25 per cent of their earnings before tax to the government. The FIRS also collects this levy.


9. CUSTOMS, EXCISE TARIFFS etc., (Consolidation) ACT

  • The Finance Act amends Section 21 of the Customs, Excise Tariffs Act, imposing an N10 per litre excise levy on non-alcoholic, carbonated, and unsweetened drinks. This is in a bid to reduce the spread of disorders such as diabetes and obesity, which are frequently induced by such beverage use. The duty is typically collected at the point of importation into Nigeria.


10. FINANCE (Control and Management) ACT [FCMA]

  • Government institutions, Ministries, Departments, and Agencies are all responsible for government income collecting. As a result, the Finance Act emphasizes the need for government institutions and affiliated entities to remit any received undesignated money, taxes, and levies into the Consolidated Revenue Fund (CRF). Furthermore, withdrawals from the CRF must be for fully sanctioned expenditures permitted by relevant legislation.



Without a doubt, the adoption of the Finance Act during the previous three years has resulted in significant advancements, and the most recent piece is no exception. Our modern construct necessitates that our laws remain attuned to global fiscal and economic trends. As a result, we must keep up the pace and create better strategies to boost long-term growth and revenue mobilization.

First off, levying a 10% capital gains tax on share transactions is a tactic to entice investors to roll over their assets while also increasing income to the government in a way that compensates for revenue loss. This is obvious evidence that the administration is serious about enhancing investor stability and trust in the country’s growth. In the larger scheme of things, everyone is encouraged to stake out their interests for the sake of the economy as a whole.


Furthermore, the inclusive act of bringing NRCs i.e., “digital” operators under a turnover tax of a fair and reasonable quota (usually 6 per cent) is a laudable initiative. It speaks volumes to the fact that the government is strongly pushing to enjoy the dividends of the digital economy. Nonetheless, FIRS must set up guidelines to complement this provision and dispel any uncertainty that could occur. Similarly, the Nigerian Police Trust Fund is not precisely new, having been established in April 2019. However, this is the first time it would be administered by the FIRS. And it notes that a 0.005 per cent tax will be levied on a company’s net earnings. However, it needs to be seen if it is a rate levied on an after-tax basis or not.


Interestingly, the new ‘sugar tax’ on drinks and carbonated beverages is an out-of-the-box idea aimed at combating negative health conditions and lowering the government’s healthcare expenses. Call it a case of killing two birds with one stone. However, there are fears that the government risks stunting the development of enterprises in the field and also, combat inflationary prices that skyrocket. Further, requiring the already overburdened educational institutions to begin paying taxes imposes additional demands on them, which may wreak havoc on the system. Why, therefore, should the advancement of the still-struggling educational sector be sacrificed on the altar of income generation?


Experts have also cautioned that the constant revisions of our tax processes may prove problematic for firms, forcing them to continually adjust to the changing rules. It’s a double-edged sword. As much as we profit from the changes, we must also consider the drawbacks, which may impair the ease of doing business for investors. Most importantly, to improve tax compliance, we need to do more than just review our laws on a regular basis. We need to build trust in the system. As such, government must prioritize putting visible projects in place to encourage citizens.

Finally, it is one thing to make laws; it is quite another to execute them. New policies impose additional enforcement duties on the relevant authorities. As such, we need to ensure that these laws are enforced to the latter to enjoy maximum impacts.

[1] i.e., Non-Resident Companies recognised under Paragraph 1 of the Companies Income Tax (Significant Economic Presence) Order, 2020.

[2] Finance Act, 2019 and SEP Order.

[3] Section 13, Finance Act 2021.

[4] Federal Inland Revenue Service (FIRS).

[5] Previously provided that companies having below the N25 million turnovers shall not be required to register as a taxable person; collect and remit VAT to the Service.




Abdulateef Ibrahim is a fifth-year law student at the University of Ilorin. He doubles as the Director of Research and Editor-in-Chief of Tax Club, Unilorin. He is an avid researcher with a passionate bias for taxation and related matters. He can be contacted via: or through his LinkedIn page


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