FG exempts bread, sanitary pads, others from VAT increase

The Federal Government yesterday said 20 basic food items, locally manufactured sanitary towels, pads and tuition relating to nursery, primary, secondary and tertiary education have been added to the exemption list of goods and services on the Value-Added Tax (VAT) under the Finance Bill 2019 signed by President Muhammadu Buhari last week.

The new Act raises VAT from 5% to 7.5%.

The presidential media aide, Laolu Akande, in a statement issued yesterday said the measure was taken in a bid to ensure that the cost of living does not rise for Nigerians because of the changes in the VAT.

The statement said the new Finance Act 2019 extended the list of goods and services exempted from VAT to allay fears that low-income persons and companies will be marginalized by the new law, reduce the burden of taxation on vulnerable segments, and promote equitable taxation.

The basic food items exempted from VAT increase are additives (honey), bread, cereals, cooking oils, culinary herbs, fish, flour and starch, fruits (fresh or dried), live or raw meat and poultry, milk, nuts, pulses, roots, salt, vegetables, and water (natural water and table water).

The new Finance Act also exempts services rendered by microfinance banks and businesses with turnover below 25 million from VAT payments.

The statement said under the new law, small companies with less than N25 million in annual turnover are charged Zero Companies Income Tax (CIT).

The statement added that CIT for companies with revenues between N25 and N100m (described in the Act as “medium-sized” companies) has been reduced from 30% to 20%, while large companies - with annual turnover greater than N100m will continue to pay the standard 30% CIT.

The new Act also includes a provision that grants to all companies ‘engaged in agricultural production’ in Nigeria ‘an initial tax-free period of five years’, renewable for an additional three years.

The new Act also provides incentives to promote tax compliance through bonus reductions in CIT for early remittance, including 2% bonus for medium-size companies and 1% bonus for other companies.

The new Act now includes “electronic mail” as an acceptable form of correspondence for persons disputing assessments by the Tax Authorities, while contributions to Pension and Retirement Funds, Societies and Schemes are now unconditionally taxdeductible.

The statement added that with the new Act, the N50 Stamp duty charge is applicable only to transactions amounting to N10,000 and above, a significant increase on the former threshold of N1,000.

The new Act also expands the list of items exempted from stamp duty.

It also revealed that certain imported goods are now subject to excise duties similar to locally manufactured goods to reduce unfair advantages previously conferred on imported goods at the expense of locally manufactured ones.