For a long time, Nigeria made few changes to its tax laws, although it was widely recognised that the tax legislation needed a lot of improvement and updating.

Since 2019 however, Nigerian has returned to a system of annual finance acts, gradually tidying and tightening up the body of tax laws. The latest annual Finance Act was delayed, and only received Presidential assent on the last day of the previous President’s term of office, which was 28 May 2023. Today, we run through the key points of the 2023 Finance Act:

Digital assets (including cyber currency)

Digital assets have been included in the definition of assets in the Capital Gains Tax Act. We think that they have always been subject to CGT, so this change seems to be intended to make that explicit.

Capital losses

Capital losses can now be set off against capital gains, which is good news for taxpayers.  However, there are limits to which losses can be set against which gains. So, losses can only be set off against gains on the disposal of the same type of asset.  For example, losses on the disposal of shares can be set off against gains on the disposal of shares, but not against a gain on the disposal of real estate. Capital losses can be carried forward for five years.

Capital gains rollover relief

Assets are now divided into five classes for roll-over relief, and shares are now included in the new Class 5. This means that gains on the disposal of shares can now be rolled over into the acquisition of new shares.  But there are restrictions, as follows:

  • The gain can only be rolled over against an acquisition of shares in the same company as those disposed of, or in other Nigerian companies, and
  • The new shares must be acquired in the same year of assessment as the disposal occurs. This is a severe restriction, especially if the disposal took place towards the end of the year of assessment.

Shipping companies and airlines

There are some technical changes regarding information to be filed by foreign shipping and airline companies, which are nothing major but important to be aware of from a compliance perspective.

Investment Allowance

The long-standing investment allowance has been abolished. This was previously 10% of cost of plant and equipment and was granted in addition to capital allowances so that 110% of cost was deducted over the relevant period. This allowance was useful for taxpayers, and helped to compensate for the effects of inflation while capital allowances are being used, and also for the effect of not being able to claim capital allowances against the Tertiary Education Tax.  A small concession is that expenditure incurred on plant and equipment before 1 May 2023 still qualifies for the allowance. Given that the Act only received assent on 28 May, it is possible that the Investment Allowance remains available for expenditure incurred up to 28 May. If investment allowance has been claimed on an asset, this must now be deducted from the value on which capital allowances are claimed.

Rural Investment Allowance

This has also been abolished. Again, expenditure incurred before 1 May 2023 will still qualify for the allowance.  This should not have much impact as the allowance was not widely used.

Hotel hard currency income

Income derived in convertible currency by hotels from “tourists” is now fully taxable. However, any such income already allocated to a reserve fund to be used for the development of new or expanded hotels, conference facilities and tourist facilities can continue to be exempt for five years, or until the funds are used for these purposes if earlier.  This change is also of limited impact but may affect some hotels materially.

Capital allowances restriction

Companies’ capital allowances are restricted and cannot exceed two-thirds of the company’s assessable profit.  However, manufacturing companies, those in agro-allied industry and companies involved in upstream and midstream gas operations are exempt from this restriction.

Import levy

A new levy of 0,5% will now be charged on imports of goods from outside Africa, ostensibly to fund Nigeria’s subscriptions and other contributions to various international bodies.

Excise Duty

The government has created a power to charge excise duty on services, if the President issues an order specifying a duty rate on any particular services.  This power is no longer limited to telecommunications services. This suggests that we will see more services becoming subject to excise duty in the future.

Life insurance premiums

Individuals can now, once again, claim a deduction for insurance premiums on the life of the taxpayer or their spouse, or payments for a deferred annuity contract on the taxpayer’s own life or that of their spouse. Any withdrawals from a deferred annuity within five years of the contribution will be taxable upon withdrawal. This provision reinstates an earlier position and should be welcomed by individuals.

Petroleum Profits Tax

There are several technical amendments to the Petroleum Profits Tax Act, which are too detailed to go into here, but contributions to a fund or scheme for decommissioning and abandoning assets will be allowed as a deduction.

Value Added Tax (VAT)

Interestingly, an anti-avoidance provision has been included in the VAT Act. A person who is appointed as agent to withhold or collect VAT is required to pay this over to the Federal Inland Revenue Service (FIRS) within 14 days of the end of the month, rather than the previous 21 days.  We understand that this is to enable the amounts withheld to be reflected in the FIRS’s records so that the person from whom the VAT was withheld does not also have to pay it.

FIRS can require a non-resident supplier of goods to charge VAT and pay it to FIRS.  If goods are purchased from such a supplier, and the importer provides proof that the supplier is registered with FIRS, then the importer will not also need to pay VAT at the port before clearing the goods with the Nigerian Customs Service. This is helpful, but we wonder if it was really necessary to require foreign suppliers of goods through electronic or digital platforms to be registered for Nigerian VAT, given that the VAT can be collected at the time of importation.

The definition of “buildings” has been expanded.  A building now has to be a structure that is permanently affixed to land for most of its useful life, and that cannot be easily removed from the land.  This definition is used in the definitions of goods and of services, as land and buildings are excluded from the definition of both goods and services. A supply of land or buildings is thus not subject to VAT.  It seems that FIRS is still concerned that taxpayers are arguing that some structures are not subject to VAT.

Tertiary Education Tax (TET)

The rate of TET has, once again, been increased, this time to 3%.  The Federal Inland Revenue Service has announced that the new rate applies to all accounting periods ending after 30 June 2023. We understand that this increase was motivated by the Tertiary Education Trust Fund.  As the tax is a further income tax, it increases the tax burden on companies’ profits, at a time when companies’ profits are already under severe pressure. It is not really clear why the increase is necessary, or why the tertiary education sector deserves funding which is not available to say primary education or primary healthcare.

Petroleum Subsidy

This was not mentioned in the Act, but the newly appointed President has announced that the government will shortly stop subsidising petrol.  The subsidy is a form of negative tax on petrol consumption.  The government’s view is that the cost of the subsidy is no longer affordable or sustainable, and that the main benefit of the subsidy accrues to the better-off segments of society.

If you’ve operations in Nigeria and would like to understand how the Finance Act could impact you, contact us today.

Russell Eastaugh

About the author:

Today’s newsletter was written by Russell Eastaugh, our African advisory lead. Russell has 40 years of experience across Africa, including as a partner at PwC Nigeria and PwC Uganda. Contact Russell at