The Nigeria Finance Act 2023 (the "Act") was signed into law on May 28, 2023. The Act introduces several significant changes to the Nigerian business environment, and in particular, the Nigerian tax regime. Here are some highlighted points for startups and

established businesses operating in Nigeria to note.

1. TAXATION OF DIGITAL ASSETS:

With an aim to raise revenue form the growing digital economy, the Act imposes a 10% tax on gains from the disposal of digital

assets.

2. DEDUCTION OF CAPITAL LOSSES:

As opposed to the erstwhile position which allowed taxpayers to carry forward capital losses for a maximum of three years, the Act allows taxpayers to carryforward capital losses for a maximum of five years. This change is designed to provide taxpayers with more flexibility to manage their tax liability.

3. ROLLOVER RELIEF ON SALE OF SHARES:

The Act restricts the availability of rollover relief on the sale of shares. Rollover relief is a tax relief that allows taxpayers to defer paying tax on gains from the sale of shares if the proceeds from the sale are reinvested in new shares. The Act now only allows rollover relief if the proceeds from the sale are reinvested in new shares within the same year of assessment. This change is designed to prevent tax payers from using rollover relief to indefinitely defer paying tax on gains from the sale of shares.

4. DELETION OF INVESTMENT ALLOWANCE ON PLANT AND EQUIPMENT:

THE Act deletes the investment allowance on plant and equipment. The investment allowance was a tax deduction that was available for the cost of new plant and equipment. While this increases the revenue for the government, it is a significant change that will arguably push the cost of capital for businesses in Nigeria further north.

5. EXCISE TAX ON TELECOMMUNICATIONS SERVICES:

The Act imposes excise tax on telecommunications services at rates to be prescribed by the President.

In addition to the above, the Act also introduces and creates some other changes concerning arears like the withholding tax rates for certain payments. Here, the Act increases the withholding tax rates for certain payments, such as payments for rent, royalties, and management fees. Furthermore, it introduces new VAT rules for digital services, such as streaming services and online gaming and increases the stamp duty rates for certain documents, such as leases. Overall, the Act is a significant piece of legislation with immediate impact on the Nigerian tax regime and by the doing of business in Nigeria. Consequently, Nigerian startups and established businesses operating in Nigeria are enjoined to review the Act in order to understand how it applies to their line of business.