@MBuhari Presented to the NASS yesterday the 2020 Appropriation Bill of N10 Trillion. Attached to the budget proposal is a Finance Bill that has significant implication for Business Owners.
While we await the full details of the Finance Bill, I'll share some highlights.
THREAD
While we await the full details of the Finance Bill, I'll share some highlights.
THREAD
The draft Finance Bill has three major planks. Namely:
- An increase of the VAT rate from 5% to 7.5%.
- Expansion of the exempt items of the VAT Act
- Raising of the threshold for VAT registration to N25m in turnover p.a.
- An increase of the VAT rate from 5% to 7.5%.
- Expansion of the exempt items of the VAT Act
- Raising of the threshold for VAT registration to N25m in turnover p.a.
Increase of the VAT rate from 5% to 7.5%
FIRS reported that it collected VAT of N1.1Trn in 2018. With this increase, we can estimate a VAT revenue target of N1.65Trn. Out of this amount, only N247.5Bn (15%) will go to the FG. The rest N1.4Trn (85%) will go to States and LGs.
FIRS reported that it collected VAT of N1.1Trn in 2018. With this increase, we can estimate a VAT revenue target of N1.65Trn. Out of this amount, only N247.5Bn (15%) will go to the FG. The rest N1.4Trn (85%) will go to States and LGs.
The FG said, they will use the additional revenues to fund health, education and infrastructure progs. But for the States, we can assume they will use the additional revenue to fund the increase in Minimum Wage and its spiral effect on the wage bill.
Expansion of the exempt items of the VAT Act
The VAT Act already exempts pharmaceuticals, educational items & basic commodities. But the Finance Bill is expanding d exempt items to include:
a. Brown & white bread;
b. Cereals including maize, rice, wheat, millet, barley sorghum;
The VAT Act already exempts pharmaceuticals, educational items & basic commodities. But the Finance Bill is expanding d exempt items to include:
a. Brown & white bread;
b. Cereals including maize, rice, wheat, millet, barley sorghum;
c. Fish of all kinds;
d. Flour & starch meals;
e. Fruits, nuts, pulses & vegetables of various kinds;
f. Roots such as yam, cocoyam, sweet & Irish potatoes;
g. Meat & poultry products including eggs;
h. Milk;
i. Salt & herbs of various kinds;
j. Natural water and table water.
d. Flour & starch meals;
e. Fruits, nuts, pulses & vegetables of various kinds;
f. Roots such as yam, cocoyam, sweet & Irish potatoes;
g. Meat & poultry products including eggs;
h. Milk;
i. Salt & herbs of various kinds;
j. Natural water and table water.
Raising of the threshold for VAT registration to N25m in turnover p.a.
The Finance Bill increases the threshold for VAT registration from Nil to N25m in turnover per annum, the objective of this is to support MSME's and make the tax authorities focus on bigger businesses.
The Finance Bill increases the threshold for VAT registration from Nil to N25m in turnover per annum, the objective of this is to support MSME's and make the tax authorities focus on bigger businesses.
What is the implication of this? It means if you do not make on average about N2m in turnover monthly or N25m yearly, you'll not be required to register for and file monthly returns for VAT even if Nil. This looks like a good initiative but it'll be interesting to see the details
Given that the 2020 Appropriation Bill (aka 2020 Budget) is likely to be passed not later than Dec 2019 (so we can return to the Jan - Dec Budget Circle), it is safe to assume that this Finance Bill might be passed along with it. Meaning it's likely to come into effect Jan 1 2020
We await the full details of the Finance Bill so we can do a deeper dive into the proposal. Nonetheless, it is good that the Budget Presentation & Proposal is coming this early. This should give businesses and organisation enough time to plan and make good inputs in their budgets
