Nigeria gazettes witholding tax regulations

Nigeria has taken a significant step in tax reform with the gazetting of new regulations on withholding tax. The regulations offer reduced rates and full exemptions for businesses, particularly small and medium enterprises (SMEs) with annual turnovers below 25 million naira. Oladejo Adeyemi, Associate Director, Commercial Practice at Andersen Nigeria, shed light on the implications of these regulations in a recent interview on CNBC Africa. The formal gazette of withholding tax marks a milestone in Nigeria's tax landscape. Adeyemi highlighted the importance of clarity in regulations, emphasizing that the gazetted copy provides clear guidelines for taxpayers and tax authorities. The previous regulations date back to 1997, leading to a need for updates to align with current transaction structures and economic developments. One of the key aspects of the new regulations is the reduction in withholding tax rates, addressing concerns raised by taxpayers about eroding profit margins. The regulations aim to ease the administrative burden on small companies by exempting those with turnovers below 25 million naira from certain obligations, allowing them to focus on business growth. However, confusion arose regarding the commencement dates and implementation timelines. Adeyemi clarified that while the document specified January 1, 2025, as the official start date, early adoption from July 1, 2024, was possible subject to ministerial approval and tax authority guidelines. The Federal Inland Revenue Service later confirmed the commencement date as January 1, 2025, to provide clarity to taxpayers. The new regulations also include measures to deter tax evasion and minimize avoidance. Adeyemi emphasized that enforcing deductions and remittances would help curb non-compliance. Parties are now required to issue formal receipts for deductions, allowing taxpayers to claim credits with tax authorities. Penalties are outlined for offenders who fail to deduct, remit, or comply with the regulations, streamlining accountability within the tax framework. In conclusion, Nigeria's new withholding tax regulations represent a positive stride towards enhancing transparency and compliance in the tax system. The reforms aim to balance the interests of businesses and tax authorities while promoting economic growth. Adeyemi's insights provide valuable clarity on the implications of the regulations and the expected benefits for taxpayers and the broader economy.