Corporate entities and individuals that have contributed to the federal government’s COVID-19 Pandemic Relief Fund are to be granted some tax reliefs, the finance minister, Zainab Ahmed, said on Monday.
The minister, who announced this in Abuja at the formal launching of the N500 billion fiscal stimulus measures in response to the COVID-19 pandemic, said this was pursuant to Section 25 of the Companies Income Tax Act (CITA).
Section 25 (1) of the CITA on deductible donations states “…for the purpose of ascertaining the profits or loss of any company for any period from any source chargeable with tax under this Act, there shall be deducted the amount of any donation made for that period by that company to any fund, body or institution in Nigeria.”
She said the incentive was an expression of government’s appreciation of the solidarity by public-spirited individuals and corporate bodies towards combating the COVID-19 pandemic through financial and material contributions.
The minister said she would soon be issuing circulars and ministerial orders to ensure that charitable donations by benevolent companies in support of the federal government’s COVID-19 pandemic efforts were tax-deductible.
In recognition of its responsibility to the people, particularly contributors to the fund, the minister said the government would establish an adequate framework for the collection, management and reporting of all the donations.
She said her ministry was developing a comprehensive framework for the transparent management of the contributions.
As a first step, the minister said President Muhammadu Buhari has approved the restructuring of the Treasury Single Account (TSA) to better mobilise cash donations from Nigerians and corporate organisations nationwide.
“Government will create flexibility and build a coalition with financial institutions, while maintaining the sanctity of the TSA,” she said.
Going forward, the minister said the COVID-19 Donors Accounts, which will form part of the existing TSA arrangement, and shall be opened with five banks, namely Zenith, Access, Guaranty Trust, UBA and First Bank.
These accounts, she said, would be linked to the main TSA for ease of monitoring and reporting.
Tax Relief to MSMEs
The minister said although the Finance Act, 2019 has significant provisions for tax relief for micro, small and medium-sized enterprises (MSMEs), corporate tax rates for medium-sized enterprise were sliced further from 30 per cent to 20 per cent, while small/micro enterprises were completely exempted from corporate taxation.
“This tax relief will be invaluable for businesses in the large informal sector that earn N25 million or less in a financial year,” she said.
“The Finance Act, 2019 has also expanded the VAT Exemption List for essential food, medical supplies and other basic items that are critical in our efforts to address the COVID-19 Pandemic,” she added.
The responses to the COVID-19 pandemic and the impact of the 14-days lockdown imposed by the federal government, she said, would have a significant impact on the transportation, distribution and availability of essential food items and medical supplies.
She said the government recognised the adverse implications of the extraordinary decisions on market women, farmers, traders and smaller businesses.