08.10.2024

Nigeria: Nigeria’s Temporary Tax Concessions and Proposed Tax Revenue Sources

Guidelines for Implementation of Zero Duty Rate on Basic Food Items

The Nigeria Customs Service (NCS) released the Guidelines for Implementation of Zero Duty Rate on Some Basic Food Items (the Guidelines) in August 2024 to implement the presidential approval of temporary exemption on Value Added Tax (VAT) on select food items from 31st July 2024 to 31st December 2024. The aim of the policy is to reduce the price of essential food items and ameliorating the hardship faced by Nigerians.

The Guidelines, as a way of administering and monitoring compliance with the Policy, stipulates that to qualify for the exemption, a Company is required to:

Be registered in Nigeria and must have been in operations for a minimum period of five years.
Have filed its annual returns and financial statement for its operational years, paid its taxes, and fulfilled its statutory payroll obligations for the period.
Importers of husked brown rice, grain sorghum or millet must demonstrate ownership of a milling plant with a minimum production capacity of 100 tons per day, and same must have been operational for a minimum of four years.
Intending importers of maize, wheat, or beans must be agricultural entities with sufficient farmlands or feed mills/agro-processing facilities that maintain an out-grower network for cultivation.

Further, interested companies that meet the requirement of the Guidelines are required to register with the Federal Ministry of Finance and ensure that at least 75% of the goods are sold through recognized commodity exchanges as well as maintain an extensive record of all transactions. Companies are prohibited from exporting the food items over which duty exemption was granted in their original or processed form. Failure to comply with the provisions of the Guidelines may lead to a forfeiture of the concessions and an obligation on the Company to pay the import duty and VAT over the imported food items.

Proposed Windfall Tax Regime

Furthermore, the Federal Government of Nigeria has also proposed to impose and charge a windfall tax on Nigerian Banks further to a proposed Finance (Amendment) Bill 2024 (the Bill). The Bill is proposed to fund capital infrastructure development, education, and health care access including other public welfare initiatives. It aims to impose a windfall tax between 50% - 70% on Nigerian banks realized profits from all foreign exchange (FX) transactions from the date of the FX unification policy (i.e., 14 June 2023 to 31st December 2025). Notably, Nigerian banks may enter into a deferred payment agreement with the Nigerian Tax Authority. Further, banks which fail to pay the tax or fail to execute a deferred payment agreement before 31 December 2024 shall be liable to pay the tax plus a penalty of 10% of the tax not paid per annum plus

interest at the prevailing Central Bank of Nigeria (CBN) minimum rediscount rate. The Bill also proposes, upon prosecution, to imprison principal officers of defaulting banks for a period not more than 3 years.

If you wish to discuss these topics, please contact:

WTS Blackwoodstone

Author

Oluwatobiloba Adekoya

Senior Associate

Nigeria

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Article published in WTS Africa Quarterly Newsletter #4/2024

Recent tax developments in Africa

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