Federal Government has declared that starting from January 2025, small businesses with an annual turnover below N25 million will no longer be liable for withholding tax payment.
This declaration was announced by the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Mr. Taiwo Oyedele, via his official X (formerly Twitter) handle on wednesday.
This is coming as a result of the the publication of the Deduction of Tax at Source (Withholding) Regulations, 2024, in the official gazette.
The regulations grant rate reductions and full exemption from withholding tax to many businesses, including Small and Medium Enterprises (SMEs) with an annual turnover not more than N25 million.
According to the chairman, the sail off date for the new regulations started September 2024, while implementation begins on 1st January 2025, to make allowance for the minimum 90-day notice required for tax changes in line with the 2017 National Tax Policy in the country.
In his statement he said: "However, there is a provision permitting the Federal Inland Revenue Service (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 relief to businesses rather than imposing a burden.”
Withholding tax was earlier introduced into the Nigerian tax system in 1977 to serve as an advance payment of income tax on specific transactions.
It was also established to provide the government with a regular revenue flow and to serve as a means of eradicating tax evasion.
Some of the new changes to the regulation include exemption of small businesses from withholding tax compliance; reduced rates for businesses with low margins; exemptions for manufacturers and producers, such as farmers; measures to curb evasion and minimize tax non-payment.
This new regulation is also aimed at bringing ease of obtaining credit and utilisation of tax deducted at source; changes to reflect emerging issues and adopt global best practices, as well as clarity on the timing of deductions.
Immediately after assuming office last year, President Bola Tinubu set up the Presidential Fiscal Policy and Tax Reforms Committee, with Oyedele as chairman, to pave out a more business-friendly tax template for the nation.
The committee, after extensive consultations with stakeholders and research from both the public and private sectors, mapped out a strategy in a recent public presentation.
The proposal includes changes to the current withholding tax regulations to exempt small businesses (SMEs) from withholding tax obligations as well as lower rates for businesses with lower margins.
