The implementation of the 2024 Withholding Tax Regulations, has taken off, signalling efforts by the government to modernise Nigeria’s tax system.
The revised tax regulations which became effective on January 1, 2025, was approved by President Bola Tinubu in July 2024 and published in the Official Gazette in October 2024.
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.”
According to the report by Punch newspaper, several transformative features of the updated policy were highlighted.
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.
It added that 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.
GIK/APA