President Tinubu Approves New Withholding Tax Policy For Nigeria

President Bola Tinubu has recently given his approval for a new withholding tax policy in the country, which will bring changes to the existing 1977 Nigeria tax system.

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Ayodele, made this announcement on Tuesday.

According to Ayodele, the new withholding tax policy will alleviate the heavy burden that the previous policy document placed on farmers and Small and Medium Enterprises.

Introduced in 1977, withholding tax was meant to be an advance payment of income tax on specific transactions within the Nigerian tax system. It was created to ensure a steady revenue stream for the government and to combat tax evasion, as Taiwo explained.

He also highlighted the challenges of the old withholding tax regime, such as uncertainties surrounding the individuals required to comply, eligible transactions, applicable rates, and the timing of remittance obligations.

“Treatment of the deduction as a separate tax, thereby adding to the list of multiple taxes and cost of doing business. Challenges regarding obtaining refunds for excess withholding tax.

“Lack of exemption threshold making the cost of compliance by taxpayers and cost of enforcement by the tax authority uneconomical. Some emerging and contemporary issues are not properly addressed,” the Tax Reform Chairman noted.

Don’t miss out on any real-time information. Join our WhatsApp group to stay updated.

CLICK HERE TO JOIN

Ayodele stated that the withholding tax regime as a whole was contributing to tax inequality.

Ayodele also revealed that the new withholding tax regime, which had been approved by Tinubu, would be officially published in the gazette within a few days.

He highlighted the main modifications, which included exempting small businesses from withholding tax compliance, reducing rates for businesses with low-profit margins, and providing exemptions for manufacturers and producers such as farmers.

Additionally, he mentioned that the reforms in the new withholding tax policy aimed to address evasion and minimize tax avoidance, facilitate access to credit and use of tax deducted at source, adapt to emerging issues and global best practices, and provide clarity on the timing of deduction and definition of key terms.