The implementation of the Withholding Tax Regulations 2024 has commenced, marking another milestone in government’s efforts to modernize the Nigerian tax system.
The revised withholding tax regulations, which came into force on January 1, 2025, were approved by President Bola Tinubu in July 2024 and published in the Official Gazette in October 2024.
Officially titled “Withholding Tax Deduction (Withholding) Regulations, 2024”, this text aims to simplify tax compliance processes, reduce inefficiencies and ease administrative burdens on businesses.
These amendments primarily target small and medium enterprises (SMEs), manufacturers, producers and farmers, key sectors for Nigeria’s economic stability and growth.
Announcing the launch of the tax regime on New Year’s Day, Taiwo Oyedele, Chairman of the Presidential Committee on Tax Policy and Tax Reforms, said on his X account (formerly Twitter): “As part of the ongoing tax reforms , the Withholding Tax Regulations 2024, approved in July 2024 and published in the Official Gazette in October 2024, comes into force today, January 1, 2025. »
According to the Punch newspaper, several transformative features of this policy have been highlighted. Among them, the SME exemption: small and medium-sized enterprises are now exempt from the obligation to comply with withholding tax, which should reduce administrative and financial constraints, while stimulating growth and innovation in this sector.
Reducing rates for businesses with low margins: businesses with limited profit margins will benefit from reduced withholding tax rates, a measure aimed at improving their cash flow and reducing their operational costs.
Exemptions for critical sectors: manufacturers, producers and farmers are exempt from the withholding tax obligation, a measure aimed at strengthening these crucial sectors to ensure their long-term viability and growth.
Simplifying tax credits: The regulation also streamlines the process of obtaining credits for taxes withheld at source, making it easier for businesses to use them.
These reforms also eliminate ambiguities related to deduction deadlines and definitions of key terms, thereby removing barriers to tax compliance.
Finally, they aim to combat tax evasion, limit the possibilities of avoidance and strengthen transparency in the tax payment process.
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