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Section 4 of the Finance Act 2020, introduces a minimum tax regime of 1%.
There will be a minimum tax of 1% tax applicable on the gross revenue made by a business whose installment taxes for the year of income is less than that of minimum tax.
The Minimum Tax shall also be applicable on gross incomes not specifically exempt under the First Schedule of the Income Tax Act.
On this note we would like to infer that, should your entity be in a loss position for in any financial period, then a Minimum Tax will be applicable on the gross revenue you make. A position which may reasonably affect your cash flows and working capital. The tax is payable in installments due on the 20th day of fourth, sixth, ninth and twelfth month of year of income.
Minimum Tax will become effective on 1st January 2021.
The Minimum Tax will be chargeable and the business should align itself to cope with any arising tax obligations should its installment taxes be less than the Minimum Tax.
The Finance Act 2020 has also deleted provisions of paragraphs (h), (s), (ss), (u) and (v) of Section 15 of the ITA as follows:
Previously, these expenses were allowable and the new provisions seeks to disallow them in computation of annual income tax. Premised on this, the costs paid to trade associations and club subscriptions on behalf of your staff shall not be deductible for tax purposes.
Effective 1st January 2021, the act establishes a Voluntary Tax Disclosure Programme.
This initiative will be in place for a period of three years, and will cover a period of 5 years from July 2016 to June 2020.
A Taxpayer shall be allowed review and declare any underpaid tax inform of Corporation tax, VAT, Withholding tax and PAYE by filling an amended return to capture the underpaid taxes. Once the Principal tax is paid relief of penalties and interest on the taxes outstanding will be granted on the following basis.
Should your entity intend to address any outstanding tax liabilities, you can take advantage of the above. Kindly note, VDP relief will not be available in case your entity is
Premised on the above, and in the new modus operandi of business during COVID period, we are keen to assist your business uphold tax compliance as per new legislation. Should you require further assistance on the above matters as well as general business advisory please get in touch with us.