A new tax regime that will minimise the cost of doing business,  improve cost of living and promote  cleaner energy has been unveiled by the Federal Government.

Value Added Tax (VAT) on cooking gas, diesel, Compressed Natural Gas (CNG) and electric vehicles, among others, have been removed.

Small businesses will also, beginning from January,  be exempted from paying taxes to boost income and employment generation.

Presidential aide Dada Olusegun yesterday on his verified X handle @DOlusegun, posted: “As part of efforts to reduce the cost of living, enhance energy security, and speed up Nigeria’s shift to cleaner energy sources, the President Tinubu-led administration has removed VAT on the following:  Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, Clean Cooking Equipment.” 

He added that in order to  incentivize the energy sector and reverse its  long-time investment drought, the government introduced tax reliefs for deep offshore oil and gas projects.

 Olusegun, quoting Minister of Finance Olawale Edun, said the decision is meant to attract global investments to the country’s deep offshore projects.

The Notice of Tax Incentives for Deep Offshore Oil and Gas Production introduces new tax reliefs, fulfilling President Tinubu’s campaign promise.  

Olusegun quoted the Coordinating Minister of the Economy as saying: “The Notice of Tax Incentives for Deep Offshore Oil and Gas Production introduces new tax reliefs to attract global investments to Nigeria’s deep offshore projects.

 “A reminder that the President, during his campaign, promised to incentivize investors who were divesting away from the country to favorable nations like Guyana and Angola.

 “Increased oil production, among other benefits of these reforms, are expected to improve the earnings of the administration in order to implement its programs successfully.”

Small businesses get tax relief

In the new  regulations, small businesses with  annual turnover of not more that N2 million will from January 1 no longer pay taxes.

They must, however, possess Valid Tax Identification Number (TIN) to qualify for the relief.

A Finance  Ministry source added  that the regulation is designed  to foster an environment where small businesses and manufacturers can benefit from tax exemptions, especially in sectors with low profit margins.

He stated that tax deducted at source would henceforth,  not be regarded as an additional cost or separate tax but treated as an advance payment towards the final tax liability of the supplier.

This approach, according to him,  is meant  to ease the burden on businesses and ensure compliance without adding unnecessary financial strain.

Under the rules, failure to remit deducted taxes or to deduct tax at source will attract significant penalties. The penalty structure aligns with existing legislation under the Federal Inland Revenue Service (Establishment) Act and the Personal Income Tax Act.

  The Federal Inland Revenue Service (FIRS) is expected  to issue further guidelines to ensure  their smooth implementation.

The measures are contained in ‘’Deduction of Tax at Source (Withholding) Regulations, 2024’’  signed by the Finance minister.

Edun said in a statement that the goals of the new tax measures  include   streamlining  “the deduction of taxes at source from payments to taxable persons, reduce complexities, and promote ease of compliance for businesses.”

He added that  the measures   ‘’cover payments made under the Capital Gains Tax Act, Companies Income Tax Act, Petroleum Profits Tax Act, and the Personal Income Tax Act. Among its objectives are promoting global best practices, reducing tax evasion, and curbing arbitrage between corporate and non-corporate structures.’’

“The objectives of these Regulations are to (a) set out the rules for the deduction of tax at source from payments to taxable persons under the Capital Gains Tax Act, the Companies Income Tax Act, the Petroleum Profits Tax Act, and the Personal Income Tax Act regarding specified transactions, ” the minister added.

[TheNation]