Insight to The New Withholding Tax Regulations 2024
On October 2, 2024, Nigeria's Federal Government released the Deduction of Tax at Source
(Withholding) Regulations, 2024 in the official gazette. These regulations lay out major changes and
rules for withholding tax (WHT) in Nigeria. The Ministry of Finance brought in these regulations on
July 1, 2024. They offer clearer rules on tax deductions at source for different transactions under
relevant tax laws. These laws include the Companies Income Tax Act, Personal Income Tax Act,
Capital Gains Tax Act, and Petroleum Profits Tax Act. The regulations begin on September 30, 2024,
with the implementation starting on January 1, 2025.
Key Objectives of the New WHT Regulations:
1. Clear Tax Deduction Rules: The regulations set out straightforward guidelines on deduction
of withholding tax for various taxable transactions.
2. Lower Deduction Rates for Low-Margin Sectors: Sectors that operate on smaller margins
will see reduced WHT rates.
3. No WHT for Small Businesses and Manufacturers: Small businesses and manufacturers will
no longer suffer WHT deduction on its income.
4. Better Tax Compliance: The regulations aim to stop tax evasion and make compliance
simpler, so businesses can follow the rules appropriately.
5. Worldwide Best Practices: The regulations bring in global standards for tax management to
cut down on differences and create a fairer tax system.
Key Points of the Rules:
1. Applicability: The WHT rules have an impact on certain transactions covered by different tax
laws such as the Companies Income Tax Act and the Petroleum Profits Tax Act. You can find
a list of eligible transactions and their WHT rates in the First Schedule.
2. Exemptions: The WHT deductions does not apply to some transactions. These include phone
charges, internet data, and plane tickets. Also, small businesses with a Tax Identification
Number (TIN) are relieved from the obligation of deduction and remittance of WHT.
However transactions over ₦2,000,000 will be subject to WHT and remitted appropriately
3. Issuance of WHT receipt: There is a duty to issue WHT receipt which states the amount
deducted from payments to vendors, suppliers and other service providers. taxes.These
receipts avail the recipients to claim of tax credits from the tax authority.
4. Sanctions for Non-Compliance: Failure to deduct WHT as required will lead to administrative
penalty on the amount not deducted only. While failure to remit WHT deducted will attract
interest and penalty on the unpaid taxes. Details about the administrative penalty are
expected soon.
New WHT Rates for 2024:
The 2024 rules effects changes to the WHT rates. These rates depend the kind of transaction and
residency principles. Here are some key examples of deals that qualify and their rates:
Implications for Businesses:
The updated withholding tax rules give businesses a clearer picture of how to deduct taxes. This
makes it easier for companies to follow the rules for those that don't make much profit. Small
businesses and certain deals now don't have to pay these taxes, which takes some pressure off and
creates a better space for new ideas and startups to grow. But keep in mind, that all businesses need
to be ready to follow these new rules by January 1, 2025, if they want to avoid getting fined.
written by: Lukman Akintobi
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