National Tax Reform Bill 2024: What Incomes Will Be Taxed for Nigerians?

 

Amid the dissonance and unending debates, heated consultations, and widespread speculations before and after the indefinite suspension of the National Tax Reform Bill  (NTRB) 2024, one thing remains clear: if the northerners had a rethink (since they are the group most antagonistic towards the bill), and the bill is passed into law, it could redefine the way Nigerians perceive and handle their incomes. From allowances to bonuses and even digital earnings, the bill proposes a sweeping approach to taxation that ensures virtually all streams of income are fair game for tax authorities.

Let’s explore in details what the NTRB 2024 intends to tax as the incomes of an individual living in Nigeria.

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What Incomes of an Individual Will Be Taxed?

The NTRB 2024 paints an all-encompassing picture of taxable incomes, leaving no stone unturned. Below is a detailed list of the incomes that would be subject to taxation:

1. Salaries and Wages:
   These are any compensation, whether monthly or otherwise, earned through employment contracts. So, if you are in an employment contract, your compensation, whether paid daily, weekly or monthly will be taxed under the proposed NTRB 2024.
2. Allowances and Benefits:
   Your allowances and benefits include:

·         Housing allowances.

·         Transport perks such as fuel or transport subsidy granted by your employer.

·         Other benefits-in-kind, such as employer-provided living accommodations or vehicles.

3. Bonuses and Premiums:

·         Year-end bonuses, compensations for exceptional performance, and any premium payments are taxable. With this, the era of not taxing cash gift given you for being the staff of the year will be gone. I think you should canvass for the death and burial of the NTRB 2024 into oblivion if you’re targeting the staff of the year in your organization! Wink!

4. Dividends and Profits:

·         Dividends distributed by companies to shareholders.

·         Profits gained from partnerships or investments.

5. Royalties, Rents, and Fees:

·         Royalties from intellectual property or resource exploitation.

·         Rent earned from leasing out property.

·         Fees charged for services rendered.

6. Gains from Digital Assets:

·         Gains from transactions involving cryptocurrencies, NFTs, and other digital investments are taxable under the proposed law.

7. Monetary Rewards and Prizes:

·         Prizes from competitions.

·         Grants, awards, and honoraria.

8. Income from Business Ventures:

·         Gains from sole proprietorships, trades, and professional vocations.

9. Pension and Annuities:

·         Income from pensions and other similar retirement funds.

10. Trustees and Estates:

·         Income accruing to trustees or derived from managing estates of deceased persons.

11. Other Forms of Income:

 This includes but is not limited to:

·         Discounts or rebates on transactions.

·         Disposal of securities or properties.

·         Interests or profits from money instruments.

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A Closer Look at the Tax Landscape

The NTRB 2024 doesn’t stop at merely identifying taxable incomes; it provides definitions and clarifications to ensure every potential loophole is addressed. Here’s what the proposed legislation says about some of the key income categories:

1. Interest Income:

Interest income is the Interest paid to Nigerian residents or Nigerian establishments of non-resident individuals is taxable, regardless of the location or method of payment. This includes penal interest, returns on discounted papers, and earnings from debt claims.

2. Employment Income:

Employment income is defined broadly, and it encompasses not just salaries and wages but any sum or benefit granted for personal expenses or gain. Perquisites such as rent-free housing or subsidized transport provided by employers are added to the taxable base as part of employment income.

3. Royalties and Dividends:

Royalties include any payment for the right to use intellectual property or resources. And under the bill, dividends are considered taxable whether from ongoing business operations or during company liquidation.

4. Family Income:

Family Incomes are incomes derived from family enterprises, where individual members’ contributions cannot be separated. These incomes are considered taxable under the proposed but now suspended NTRB 2024.

5. Digital Gains:

Gains from digital assets are gains from trading, holding, or transacting in digital assets, including cryptocurrencies. These will be explicitly taxed if the NRTB 2024 is passed into law.

6. Miscellaneous Earnings:

Incomes such as awards, winnings, and even compensating payments from securities transactions will be taxed.

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Likely Implications for Nigerians

For the average Nigerian resident, this now indefinitely suspended comprehensive tax regime means every aspect of income is liable for scrutiny and taxation. Here’s what it might look like:

1. Expanded Tax Liability:
No longer can individuals rely on certain perks or earnings to be untaxed. Housing benefits, digital income, or even one-off awards now add to tax obligations.

2. Increased Administrative Requirements:
Mandatory filing for all residents ensures no one slips through the cracks. For salaried employees and freelancers alike, record-keeping becomes non-negotiable.

3. Potential Reduction in Disposable Income:
With more incomes classified as taxable, take-home pay will shrink. This leaves less for spending, saving, or investing.

4. Freelancers and Gig Workers Under the Microscope:
The gig economy, which has thrived on minimal regulatory interference, will, —if the NRTB 2024 is revisited and passed into law—now have to comply with formal tax rules, affecting freelancers, content creators, and online traders.

5. Financial Awareness Becomes Critical:
To navigate these probable changes, Nigerians will need to be proactive about understanding the tax system, maximizing deductions, and planning finances carefully.

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Possible New Chapter in Taxation

The NTRB 2024 promises a paradigm shift in Nigeria’s approach to income taxation. By broadening the scope of what is taxable, it aims to create a more inclusive and equitable system, capturing earnings across traditional and emerging economic sectors.

However, the effects on individuals are twofold. While the expanded tax base ensures fairness, it also demands greater financial discipline and awareness from taxpayers. The days of unreported earnings or tax-free allowances are numbered if NTRB 2024 manages to survive the current antagonistic attacks.

Imagine a future where every naira you earn, from salaries to digital trades, is accounted for and taxed fairly.

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Final Thoughts

The NTRB 2024 might seem like a heavy burden on individual incomes, but it also offers a pathway to more efficient revenue collection and national development. By understanding how these changes affect you, preparing ahead, and adapting smartly, you can mitigate the impact on your finances.

In the meantime, we are keeping our fingers crossed. We are waiting. Will NTRB 2024 be revisited by the House of Representatives that threw it into the anonymous pit of indefinite suspension?

As a Nigerian or a foreigner resident in Nigeria, will you ensure that NTRB 2024 doesn’t see the light of the day? Or will you do otherwise? Let me know your take in the comment section below.