The National Assembly is deliberating on a bill that proposes raising the Value-Added Tax (VAT) from the current rate of 7.5% to 10% by the year 2025. The executive bill, which was reviewed by TheCable, outlines a gradual increase of the VAT rate to 12.5% by 2026 and maintains this rate until 2029, before potentially escalating to 15% from 2030 onwards.
This initiative follows comments from Mr. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, who stated on May 8, 2024, that an increase in the VAT rate is necessary to bolster the nation’s fiscal framework.
In addition to the proposed VAT hike, the bill seeks to reduce the corporate income tax (CIT) from the current rate of 30% to 27.5% by 2025, with a further reduction to 25% slated for 2026. Notably, businesses with a turnover of less than N20 million would be exempt from CIT.
The details of the proposed tax structure indicate a phased approach to VAT and CIT, aiming to enhance revenue while providing relief to small businesses. According to the bill, “VAT shall be charged on the value of all taxable supplies at the following rates: (a) 10% for the 2025 year of assessment; (b) 12.5% for the years 2026 through 2029; and (c) 15% for the 2030 year of assessment and thereafter.”
The bill also outlines stipulations for companies that fall under the minimum tax criteria. If a company’s effective tax rate is less than 15%, it will be required to pay an additional tax to equal this rate, applying to both multinational groups and firms with turnovers exceeding N20 billion.
As discussions progress, stakeholders in the business community and the public await further details on the potential implications of these proposed tax changes on the economy and daily life.
