NSE, KPMG Outline Application of Finance Act to Capital Market
By Adedapo Adesanya
The Nigerian Stock Exchange (NSE) in collaboration with top tax advisory agency, KPMG Nigeria, held a symposium on the amendments contained in the Finance Act 2020 on Monday, February 3.
The workshop was organised to understand the implications of the newly signed law on activities in the Nigerian financial markets with focus on the capital market.
The Finance Act is regarded as a significant milestone for Nigeria as it marks a return to active fiscal supervision motivating regular review of the macro environment and stimulation of the economy on an annual or at least regular basis by means of such instruments as a Finance Act.
The Act introduces changes to the Companies Income Tax Act, Value Added Tax Act, Petroleum Profits Tax Act, Personal Income Tax Act, Capital Gains Tax Act, Customs and Excise Tariff (Consolidation) Act and Stamp Duties Act.
One of the many perks of the act, as amended, was the introduction of tax incentives for investment in infrastructure and capital markets; support small businesses in line with the ease of doing business reforms and raise revenue for government, by various fiscal measures, including increase in the VAT rate from 5 percent to 7.5 percent, which took effect on Saturday, February 1, 2020.
Speaking at the event, the Chief Executive Officer (CEO) of the exchange, Mr Oscar Onyema, said that the signing of the Finance Bill into law was a landmark achievement for the Nigerian capital market.
According to him, this includes creating tax incentives for public companies and capital market investors; removal of double taxation in Collective Investment Schemes (CIS) and Real Estate Investment Trusts (REITs); as well as manufactured dividend in securities lending among others.
“Since 2014, the exchange alongside Securities and Exchange Commission (SEC) as well as other capital market stakeholders have been at the forefront of advocacy with policy makers and tax authorities for favourable tax structures for primary and secondary markets activities in the Nigerian capital market.
“The NSE, in its efforts to support the growth of the Nigerian economy and its issuers is, therefore, happy to collaborate with leading tax expert, KPMG to highlight the implications of these new rules and provide guidance on how to effectively navigate the provisions of the bill, especially as it relates to taxes,” he said.
On his part, the Partner & Head, Tax, Regulatory and People Services, KPMG, Mr Wole Obayomi, said the act was a landmark legislation that should be embraced by all stakeholders to ensure it achieves its laudable objectives.
“The removal of multiple tax footprints for securities lending and real estate investment schemes is expected to stimulate activities in those segments of the market.
“The generous incentives for the small and medium enterprises (SMEs) in the Finance Act coupled with the launching of the Growth Board for capital raising by that sector from the Nigerian Stock Exchange, are timely interventions to drive the growth of the economy through the SMEs.
“Overall, the Finance Act 2019 is a welcome development,” he declared.
During a presentation on the Implementation for Nigerian Corporates, Financial Market and The Economy, the Senior Manager, Tax, Regulatory and People Services, Mr Ikechukwu Ene, noted key areas that the changes in the Finance Act affect the capital market: Securities Lending, Real-Estate Investment, Excess Dividend Tax Rule, Unit Trust and Business Organizations.
In terms of securities lending, he said that the recent amendment to the tax laws by the Finance Act 2019 was in line with global best practices in securities lending activities, which he said will boost market liquidity, following the elimination of tax on manufactured dividend arising from securities loan transaction.
Speaking on the Excess Dividend Tax (EDT) Rule contained in the Finance Act, Mr Ene clarified that the amendment will help to mitigate incidence of double tax by excluding certain profits from the EDT.
According to him, these include; franked investment income – an income in the form of dividends paid to a company from earnings on which corporation tax has already been paid by the originating company; after-tax profits; and tax-exempt income among others.