The Minister of Finance, Budget & National Planning, Zainab Ahmed, expects a massive lift for early stage entrepreneurs if the Finance Bill prepared in 2019 finally receives the approval of the National Assembly and the President this year.
The Finance Bill aside increasing VAT to 7.5% has some provisions that lower or totally remove the statutory obligations previously required of startups in Nigeria. The aim is to help small businesses survive early stage headwinds.
Although all company registered in Nigeria are mandated to pay a 30% Company Income Tax (CIT) after an 18-month exemption window, the new Finance Bill, if eventually approved, has a different approach. It makes provision for startups to be exempted from paying tax in the first 3 years of operations.
According to Zainab Ahmed, businesses with an annual turnover of less than N25 million should be exempted from the CIT framework while those with annual revenues between N25 million and N100 million should pay 20% CIT instead of the initial 30%.
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Backing up the tax holiday, the Minister believes startups will plow back the fund meant for servicing CIT into their ventures to strengthen market position and boost survival going into the future.
In Africa, for instance, Senegal and Tunisia have put in place startup acts that create an enabling environment for early stage entrepreneurs to thrive.
Hence, as the AfCTA agreement goes into force in mid 2020, preparing the environment for Nigerian entrepreneurs to compete favourably, in regard to ideas and products marketed or exported from other parts of the continent, will determine what share of the spoils of the ‘quasi-unified’ market accrues to the nation with the largest market among them all.
The Finance Bill is before the National Assembly waiting for approval anytime soon.