The House of Representatives is set to debate the general principles of a bill seeking to amend the Companies Income Tax to protect companies operating in losses from paying the minimum tax.
The minimum tax is payable by companies having no taxable profits for the year or where the tax on profits is below the minimum tax.
However, companies in the first four calendar years of business, and those engaged in primary agriculture business, or small companies are exempted from the variant of tax.
The proposed legislation is titled, “A Bill for an Act to Amend the Companies Income Tax Act to Provide Adequate Security and Guarantee for Businesses and Companies in Relation to Payment of Minimum Tax Upon Losses in each Assessment Year and for Related Matters.”
A copy of the bill exclusively obtained by Sunday PUNCH revealed that the proposed law sought to amend Section 33 of the Principal Act by deleting the phrase “Results in a loss or where a company’s ascertained total profits.”
In the amendment, a sub-section was inserted to read in the place of the deleted phrase, “Any company in operation that records losses in the assessment year.”
In the explanatory note, the Peoples Democratic Party lawmaker noted that the bill sought to amend the provision in relation to the assessment of companies for the payment of tax in each assessment year.
According to him, “The emphasis is to protect the companies which are in operation but with losses from paying minimum tax. The amendment primarily proposes an exemption for such categories of companies under the Companies Income Tax Act in each assessment year.”
In a brief interview with our correspondent on Saturday, the lawmaker noted that when passed, the bill would ensure fair taxation on companies and made them competitive for the good of the nation’s economy.
“The objective of this amendment is to provide fairness to taxpayers to ensure continued economic growth, especially in the wake of the economic realities that have resulted in a lot of companies recording losses and having to pay minimum tax despite the losses incurred,” he added.
Following the signing into law on Monday, January 13, 2019, which made several amendments to the Company Income Tax Act, Nigerian companies are no longer required to pay a minimum tax on their assets or equity capital.
The revised Section 33 of CITA which the bill seeks to further amend, requires minimum tax to be computed as 0.5 per cent of gross turnover, less franked investment income.
Gross turnover is the gross inflow of economic benefits (cash, revenues, receivables, other assets) arising from the operating activities of a company, including sales of goods, supply of services, receipt of interest, rent, royalties or dividends.”
Should the bill scale through a second reading, it is expected to enjoy stakeholders’ support given the number of companies that folded up in the past few years owing to a difficult operating environment.
Despite a legion of executive orders signed by former President Muhammadu Buhari to facilitate the ease of doing business, many companies have been grappling with the running costs, particularly the cost of diesel given the epileptic power supply in the country.
Punch
