The signing of the 2020 Finance Bill into law by President Muhammadu Buhari has been welcomed by insurance operators, who said the Act, has brought great tax relief to the insurance business.
The Special Adviser to the President, Femi Adesina, in a statement said the signing was sequel to its passage by the National Assembly and subsequent forwarding by the legislature to the President for assent.
According to Adesina, President Buhari, while presenting the 2020 Appropriation Bill to the National Assembly, had also presented the Finance Bill and said: “This Finance Bill has five strategic objectives, in terms of achieving incremental, but necessary, changes to our fiscal laws.
“These objectives are; Promoting fiscal equity by mitigating instances of regressive taxation; Reforming domestic tax laws to align with global best practices; Introducing tax incentives for investments in infrastructure and capital markets; supporting Micro, Small and Medium-sized businesses in line with our aase of doing business reforms; and raising revenues for hovernment.
“The draft Finance Bill proposes an increase of the VAT rate from five per cent to 7.5 per cent, as such, the 2020 Appropriation Bill is based on this new VAT rate,” he added.
With this Bill now into law, insurance companies would be able to carry forward losses indefinitely as opposed to the 4-year restriction currently in place.
Life and non-life businesses would no longer be liable to special minimum tax provision and all wholly, exclusively, reasonably and necessarily incurred expenses will be tax deductible.
Furthermore, “taxable investment income” would be limited to “income derived from the investment of shareholders’ funds”. This seeks to clarify taxable income and limits it to income accruing to the insurance company as against income accruing to the insurance fund., according to experts analysis.
According to experts, this is game changer in ensuring the fair taxation of insurance companies.
Reacting to the new law, the Director-General, Nigerian Insurers Association (NIA), Mrs. Yetunde Ilori, said the tax review which was part of the new law, is something the industry has been looking forward to, stressing that the review is a welcome and favourable developments to the insurance industry.
She stated that the tax relief will affect all stakeholders. “This is something we have been working with KPMG over the years we are happy we finally got the relief,” she said.
Also, the Executive Secretary, Nigerian Council of Registered Insurance Brokers, Fatai Adegbenro; said the tax review is a good development for insurance industry as the amounts incurred on the unnecessary taxes would now be injected into the operations of the insurance companies.