The Federal Government has commenced the implementation of the 2024 Withholding Tax Regulations, signalling effort to modernise Nigeria’s tax system.
Approved by President Bola Tinubu in July 2024 and published in the Official Gazette in October, the revised regulations became effective on January 1, 2025.
Formally titled the “Deduction of Tax at Source (Withholding) Regulations, 2024,” the updated regulation is designed to streamline compliance processes, reduce inefficiencies, and ease administrative burdens for businesses.
These changes are particularly aimed at Small and Medium Enterprises, manufacturers, producers, and farmers – sectors considered vital to Nigeria’s economic stability and growth.
Announcing the commencement of the new tax regime on New Year’s Day, the Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, said on his X (formerly Twitter) account, “As part of the ongoing fiscal policy and tax reforms, the 2024 Withholding Tax Regulations, which was approved in July 2024 and published in the Official Gazette in October 2024, take effect today 1 January 2025.”
He further highlighted several transformative features of the updated policy.
Among them is the exemption of SMEs from withholding tax compliance, a move expected to alleviate administrative challenges and financial constraints, thereby fostering growth and innovation in the sector.
Businesses with low-profit margins will also benefit from reduced withholding tax rates, which are intended to improve cash flow and lower operational costs.
The new regulations exempt manufacturers, producers, and farmers from withholding tax obligations, a measure aimed at strengthening these critical sectors to ensure their sustainability and long-term growth.
Also, the reforms streamline the process of obtaining credit for taxes deducted at source, making it easier for businesses to utilize such deductions efficiently.
By addressing longstanding issues, such as ambiguities in the timing of deductions and definitions of key terms, the updated regulations eliminate barriers that previously made compliance difficult.
The reforms are also designed to curb tax evasion, minimize avoidance opportunities, and enhance transparency in tax remittance.
Recall that the Federal Government unveiled new tax regulations aimed at reducing the tax burden on the manufacturing sector and small businesses.
This was disclosed in the “Deduction of Tax at Source (Withholding) Regulations, 2024,” signed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun.
The Deduction of Tax at Source (Withholding) Regulations, 2024, aim to streamline the deduction of taxes at source from payments to taxable persons, reduce complexities, and promote ease of compliance for businesses.
The newly introduced regulations cover payments made under the Capital Gains Tax Act, Companies Income Tax Act, Petroleum Profits Tax Act, and the Personal Income Tax Act.
Earlier, Oyedele revealed that the highest-earning Nigerians could soon pay over N1m monthly in Pay-As-You-Earn tax under the proposed tax bills aimed at correcting fiscal inequities and simplifying the system.
He disclosed this in a series of tweets on his official X account on Monday.
Oyedele stated that the proposed changes would address the regressive nature of the current tax structure, which has remained unchanged since 2011.
He explained that inflation over the years has caused “fiscal drag,” pushing many low-income earners into higher tax brackets.