In the amended Finance Act of 2024, the Nigerian National Assembly has raised the windfall tax on banks’ foreign exchange (FX) earnings to 70 percent from its originally proposed level of 50 percent.

The government levies a windfall tax on industries or enterprises that have gained substantial advantages from favorable market circumstances.

The Finance Act (Effective Date Variation) Order, 2023 was signed by President Bola Tinubu on July 6, 2023 and came into force from September 1, of the same year.

On July17th,Tinubu urged Parliament to modify this act in order to introduce a windfall tax targeting banks.

On July 23rd, the amended bill was approved by both houses of the national assembly. The revised legislation mandates that banks pay a tax of 70% on profits generated from all foreign exchange transactions during the financial years spanning from 2023 to 2025, with funds being allocated for federal government use.

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It is the duty of the Federal Inland Revenue Service (FIRS) to evaluate earned profits, gather, document and ensure payment compliance for this tax.

The FIRS may engage in postponement arrangements with banks if such agreements are formalized by December 31st, 2024.

An offence will be committed by any bank that fails to pay the windfall tax or arrange a deferred payment agreement prior to the deadline, according to the Finance Act.

If found guilty, the banks in question will have to pay the tax that was held back along with a penalty of 10 percent per year and interest at the current minimum rediscount rate established by Nigeria’s Central Bank (CBN). Additionally, top executives overseeing these institutions could potentially be incarcerated for up to three months.

Lawmakers have mandated that the retroactive implementation of a 70 percent windfall tax will commence from January 1, 2023.