The federal government is expected to begin implementation of new withholding tax laws which grant rates reduction and full exemption from Withholding Tax to many businesses, including SMEs with annual turnover not exceeding N25 million, by 1st January 2025.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, in a post on his X handle on Wednesday, explained that the new tax law has been gazetted.
Read also: FG proposes NIN, tax for foreigners.
The purpose of the regulation, according to the gazetted copy sighted by BusinessDay is to remove complexities in the deduction of tax at source; reduce the rates of deduction for sectors with low margins; provide exemptions for small businesses and manufacturers; promote the ease of tax compliance and administration; curb tax evasion among others.
These Regulations apply to taxes deductible at source from payments to taxable persons as defined under the Capital Gains Tax Act, the Companies Income Tax Act, Petroleum Profits Tax Act, and the Personal Income Tax Act.
According to Oyedele, “Deduction of Tax at Source (Withholding) Regulations, 2024, has been published in the official gazette. The Regulations grant rates reduction and full exemption from Withholding Tax to many businesses, including SMEs with annual turnover not exceeding N25 million.
Read also: Nigeria to widen tax net over revenue shortfall
“The commencement date of the new Regulations is 30th September 2024, while implementation begins on 1st January 2025 to allow for a minimum of 90 days notice required for tax changes in line with the 2017 National Tax Policy.
“However, there is a provision permitting the FIRS, with the approval of the Finance Minister, to issue guidelines for the implementation of the Regulations and where appropriate, permit early application of the Regulations from 1st July, 2024. The essence of this provision is to enable persons who wish to adopt the Regulations early to do so given that it is generally providing reliefs to businesses rather than imposing a burden.”
According to the regulation, transactions exempt from deduction at source include goods manufactured or materials produced by persons making supply; and imported goods where the transaction does not create a taxable presence in Nigeria for the foreign supplier.
Others are compensating payments under a Registered Securities Lending Transaction in line with section 81(8) of the Companies Income Tax Act; any distribution or dividend payment to a Real Estate Investment Trust or Real Estate Investment Company as provided under section 80(5) of the Companies Income Tax Act; across-the-counter transactions as defined under these Regulations; interest and fees paid to a Nigerian bank by way of direct debit of the funds which are domiciled with the bank.
Read also, taxation, cost of power critical in growth of manufacturing sector
Also, any payment in respect of income or profit which is exempt from tax; telephone charges, internet data and airline tickets; out-of-pocket expense that is normally expected to be incurred directly by the supplier and is distinguishable from the contract fees; insurance premium are exempted.
“Supply of Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Premium Motor Spirits (PMS), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO), Dual Purpose Kerosene (DPK), and JET-A1; commission retained by a broker from money collected on behalf of the principal in line with the industry norm for such transactions ; and winnings from a game of chance or a reality show with contents designed exclusively to promote entrepreneurship, academics, technological or scientific innovation are exempted from WithholdingTax,” it stated.
It also stated that an exemption from deduction at source in this regulation shall not be deemed as an exemption from the relevant income tax except as provided in the enabling law.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
