• Monday, October 14, 2024
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FG to begin new tax law implementation from January 2025

New tax policies to help manufacturers, SMEs grow economy, says Oyedele

Taiwo Oyedele, chairman of the Presidential Tax Reform Committee

The Federal Government is to begin implementing a new tax law by January 1, 2025, which will grant rate reductions and full exemption from Withholding Tax to many businesses, including SMEs with annual turnover not exceeding N25 million.

Taiwo Oyedele, chairman of the Presidential Fiscal Policy and Tax Reforms Committee, explained in a post on his X handle on Wednesday that the new tax law has been gazetted.

According to the gazetted copy sighted by BusinessDay, the regulation’s purpose is to remove complexities in tax deduction 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, and curb tax evasion, among other things.

Read also: Five banks pay N172bn taxes in six months

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, the 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.

“The commencement date of the new regulations is September 30, 2024, while implementation begins on January 1, 2025, to allow for a minimum of 90-day 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 July 1, 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; 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.

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 premiums are exempted.

Read also: FG proposes NIN, tax for foreigners

“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 withholding tax,” it stated.

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