The National Assembly has raised the windfall tax on banks’ foreign exchange (FX) gains to 70 percent, up from the initially proposed 50 percent, in the amended Finance Act of 2024.
A windfall tax is a special tax imposed by the government on businesses that have profited significantly from favorable market conditions.
On July 6, 2023, President Bola Tinubu signed the Finance Act (Effective Date Variation) Order, 2023, which took effect on September 1, 2023. On July 17, Tinubu requested the National Assembly to amend the finance act to include the windfall tax on banks.
Both chambers of the National Assembly passed the amended bill on July 23.
The amended Act stipulates a 70 percent levy on the profits from all FX transactions conducted by banks between the 2023 and 2025 financial years, to be paid to the federal government.
“The Federal Inland Revenue Service (FIRS) shall assess the profits, collect, account for, and enforce payment of the tax in accordance with its powers under the Federal Inland Revenue Service (Establishment) Act 2007,” the document states.
The FIRS may enter into deferred payment agreements with assessed banks, provided these agreements are executed by December 31, 2024.
The Finance Act mandates that any bank failing to pay the windfall tax or to execute a deferred payment agreement by December 31 will be committing an offense. Such banks will be required to pay the tax withheld, along with a 10 percent penalty per annum on the unpaid tax and interest at the prevailing Central Bank of Nigeria (CBN) minimum rediscount rate. Additionally, the principal officers of the offending banks could face imprisonment for up to three months.
The 70 percent windfall tax is set to take effect from January 1, 2023.
