It is no longer new that the advent of the Finance Act 2020, which is majorly a bulk of significant change in the Company Income Tax Act and its related allies in the tax family,(VAT etc.) has brought a shift in the ways of doing business in Nigeria. Below are brief highlights of what to expect mostly as an SMEs (Small to Medium Scale Enterprises).
- EXEMPTION OF SMALL COMPANIES FROM INCOME TAX
The recent update in section 23(1)(o) of the Company Income Tax Act (CITA) exempts the profit of a “Small company” in a relevant year of assessment from company income tax. The following are the conditions precedent to the application of the amendment by any entity.
- The gross turnover of the company must be from N25million and below.
- The company must have registered for tax purposes (i.e registered for VAT, TIN in a tax office within its jurisdiction)
- The company must have filed its annual returns within its due date.
- The company must have complied with all other provisions under the CITA including penalties where applicable.
Companies who do not meet these conditions could be assessed in ways not limited to administrative or best of judgement based on information available to the service. This means that the companies in the category may not worry about the monthly filing of VAT (When it is not charged). However, the company is expected to file its annual returns (Submit to the FIRS) even though no amount is paid. Any VAT charged to clients must be remitted even when the gross turnover is not up to N25 million.
Watch this space for more on the CITA and the impact on SMEs.