The Finance ACT 2021: A Brief Overview Of Its Amendments And The Attendant Implications For Doing Business In Nigeria


By Oyetola Muyiwa Atoyebi, SAN.


President Muhammadu Buhari on the 31st of December, 2021, signed the 2021 Finance Bill (now Finance Act 2021) into law. Finance Act 2021 (“FA 2021”), which took effect on 1 January 2022, has introduced major changes to Nigeria’s tax and regulatory landscape. It amends the provisions of key tax legislation such as the Capital Gains Tax Act, Companies Income Tax Act, Personal Income Tax Act, Tertiary Education Trust Fund Act, Customs & Excise Tariff (Consolidation) Act, Value Added Tax Act, Federal Inland Revenue Service (Establishment) Act, Tertiary Education Trust Fund (Establishment) Act and Nigeria Police Trust (Establishment) Act.

It also amends some other non-tax legislation such as the Fiscal Responsibility Act, Finance (Control and Management) Act, and the National Agency of Science and Engineering Infrastructure Act, with the view to recalibrate them to be able to address current/modern business, social and economic actualities.

This article intends to highlight some of these key amendments and what their implications will be for businesses in Nigeria.

Taxing Non-resident Digital Companies

Under Section 4 of the Act, The Federal Inland Revenue Service (FIRS) may assess Companies Income Tax (CIT), on the income of a non-resident digital service company involved in transmitting, emitting, or receiving signals, sounds, messages, images, or data of any form, including E-commerce, app stores and online adverts.[1] This is an amendment to Section 13(2) of the Companies Income Tax Act. This method of taxing companies is typically known as a B0J assessment.

Before the amendment in 2021, only non-resident companies which have created a tax presence in Nigeria by reason of having a fixed base, a dependent agent, or a taxable single contract to which profits are derived and attributable in Nigeria may be subject to a BOJ assessment.

With this new amendment, companies that provide digital services and have a Significant Economic Presence (SEP) in Nigeria, have now been included within the categories of non-resident companies, which may be subject to the BoJ assessment.

The above is subject to these two (2) conditions:

That the non-resident company declares;

  • No assessable profits or
  • A lower-than-expected assessable profits in a tax year.

Dividends for Company Income Tax Purposes

Previously, Dividends for the purpose of Company Income Tax as defined under the act included “compensating payments received/paid in Regulated Securities Exchange Transaction (RSLT)”. This also came with a condition that the underlying transaction of the RSLT giving rise to the compensating payment should be a receipt of dividends by a borrower on any shares or securities received from its approved agent or a lender in a RSLT.

Under the Finance Act, 2021. This condition is removed. [2]

The implication of this is that companies involved in compensating lending transactions should take care to note compensating payments that are liable to taxation, or deductible under the new definition of dividends in relation to compensating payments.

The Reduction of the Minimum Tax Rate Between January 2019 And December 2021.

One commendable fact about the passage of the Finance Act 2020, is that it aided the protection of taxpayers from the devastating effects of the COVID-19 epidemic on their enterprises, by providing a time-limited reduction in the rate of minimum tax from 0.5 per cent to 0.25 per cent of gross sales. Only the years of assessment from January 1, 2020 to December 31, 2021, were subject to the decreased minimum tax rate.

However, there was some debate over whether enterprises that filed their tax returns before the effective date of the Finance Act 2020 incentive could take advantage of the incentive. The Finance Act of 2021 clarifies this issue by stating that the incentive can be used for any two accounting periods between January 1, 2019 and December 31, 2021, as the taxpayer prefers.

Despite this explanation, the position of taxpayers who may have remitted taxes at the 0.5 per cent rate for the relevant period is still uncertain.

Data Protection

The Finance Act of 2021 revised the Federal Inland Revenue Service (FIRS) (Establishment) Act of 2007, to establish a broad responsibility on anybody operating in an official capacity or working for the Act’s administration who has access to taxpayer information to treat it as secret and private.[3]

Previously, the obligation only applied to information relating to a company’s profits or items of profits. In keeping with the Nigerian Data Protection Regulations and the global trend to assure data protection, the Finance Act of 2021 strengthened the data protection responsibility placed on FIRS personnel, not only because of its primacy as a right but also because of its economic need.

Tertiary Education Tax Rate

The Tertiary Education Tax, which was formerly imposed at a rate of 2% on the assessable profit of companies registered in Nigeria would now be imposed at a rate of 2.5 per cent. However, this tax does not apply to small businesses. As a result, corporations in Nigeria, with the exception of small businesses, are now subject to higher taxation. Furthermore, any company subject to Tertiary Education Tax must pay within 30 days of receiving a notice of assessment from the FIRS, rather than the 60 days that was previously the case. [4]

Government’s Borrowing Powers

The Fiscal Responsibility Act of 2007 (the FRA) was changed by the Finance Act of 2021 with regard to government debt management. Prior to the Finance Act of 2021, the FRA’s debt management guidelines stated that government at all levels might borrow only for “capital investment” and “human development,” and only on “concessional terms with low-interest rates and a relatively extended amortization time.” According to the FRA, “concessional terms” imply that the loan must have an interest rate of no more than 3%. In government-related financings, the FRA’s interest rate cap was a major issue. The language of the FRA has now been modified by the Finance Act of 2021.

In addition to borrowing for capital investment and human development, the Finance Act of 2021 allows governments at all levels to borrow for “important reforms of major national importance.” Furthermore, government borrowing may be on “concessional terms or at relatively low-interest rates,” establishing a distinction between “concessional terms” and “relatively low-interest rate” borrowing. The changes made by the Finance Act, of 2021, increase the government’s borrowing powers.[5]

Capital Gains Tax

Capital Gains Tax is now due at a rate of 10% on gains arising from the sale of shares in any Nigerian firm, unless the proceeds are used to acquire shares in the same entity or other Nigerian companies within the same assessment year, or the proceeds are less than N100 million in any 12-month period.

With the introduction of Capital Gains Tax on share transactions, it is critical for transaction parties to consider how the Capital Gains Tax due (if any), will affect the pricing conditions and tax provisions in the sale and purchase agreement. The parties may need to consider alternative transaction arrangements.[6]


The Act also imposes a so-called Sugar Tax. This is an excise duty at the rate of NGN10 per litre payable on non-alcoholic, carbonated and sweetened beverages.

It is hoped that the introduction of such a tax will discourage the consumption of sweetened beverages due to the negative effects associated with them. Savings on healthcare costs, as well as the usage of realized profits and savings for health-related projects and activities, are other advantages.


With the changes introduced into the fiscal landscape by the Finance Act 2021, it is important for taxpayers to note the implications of its provisions on their business operations. While the Act makes some useful changes to the tax laws, it also introduces new taxes, increases existing taxes, and creates additional tax compliance obligations which will create additional tax liabilities for taxpayers.  These new taxes also bring with them, the attendant issue of enforcement.

It is advised that taxpayers consult their lawyers on how to comply with the provisions of the Finance Act, 2021.


Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm) where he also doubles as the Team Lead of the Firm’s Emerging Areas of Law Practice.

Mr. Atoyebi has expertise in and vast knowledge of Corporate and Commercial Law and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of a Senior Advocate of Nigeria.

He can be reached at [email protected]


Ene is a member of the Corporate and Commercial Team OMAPLEX Law Firm. She also holds commendable legal expertise in Banking and Finance Law.

She can be reached at [email protected]

[1] Section 4(c) of the Finance Act, 2021.

[2] Section 9(1)(d) of the Finance Act 2021

[3] Section 21 of the Finance Act, 2021.

[4] Sections 28 and 29 of the Finance Act, 2021.

[5] Section 40 of the Finance Act, 2021.


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