Abuja, Nigeria
Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, says the federal government has approved exemptions for farmers and Small businesses from paying Withholding Tax.
This comes as part of an amendment to the previous tax regime such as the reduction of rates for businesses with low margins and measures to curb evasion.
Oyedele disclosed in a post on X on Tuesday, saying the gazette will be signed in the next few days.
He said key changes introduced to the rewritten withholding tax regime include; reduced rates for businesses with low margins, measures to curb evasion and tax avoidance, exemption of small businesses from withholding tax, clarity on timing of deductions and key terms etc.
“Withholding tax was introduced into the Nigeria tax system in 1977 to serve as an advance payment of income tax on specified transactions,” the post on X reads.
“As the regime expanded over time to cover more transactions, various ambiguities and complications crept in. This resulted in many businesses, especially SMEs, being exposed to an excessive burden of compliance and a strain on the working capital of low-margin businesses.
“As part of the ongoing fiscal policy and tax reforms, a new withholding tax regime has been approved. The key changes introduced are to address the identified challenges and specifically include the exemption of small businesses from Withholding Tax compliance and reduced rates for businesses with low margins.
“Exemptions for manufacturers and producers such as farmers, measures to curb evasion and minimise tax avoidance. Ease of obtaining credit and utilisation of tax deducted at source, changes to reflect emerging issues and adopt global best practices and clarity on the timing of deduction and definition of key terms.”
Withholding Tax was designed by the government to collect Income Tax in advance, usually deducted at rates from contracts ranging from 5 per cent to 10 per cent based on the transaction.
