The Federal Government has unveiled new tax regulations aimed at reducing the tax burden on the manufacturing sector and small businesses.
This was disclosed in the Deduction of Tax at Source (Withholding) Regulations, 2024, signed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, on Wednesday.
The Deduction of Tax at Source (Withholding) Regulations, 2024 aim to streamline the deduction of taxes at source from payments to taxable persons, reduce complexities, and promote ease of compliance for businesses.
The newly introduced regulations will cover payments made under the Capital Gains Tax Act, Companies Income Tax Act, Petroleum Profits Tax Act, and the Personal Income Tax Act. Among its objectives are promoting global best practices, reducing tax evasion, and curbing arbitrage between corporate and non-corporate structures.
The objectives of these Regulations are to (a) set out the rules for the deduction of tax at source from payments to taxable persons under the Capital Gains Tax Act, the Companies Income Tax Act, the Petroleum Profits Tax Act, and the Personal Income Tax Act regarding specified transactions.
The regulations outline rules for deductions, targeting areas where tax collection has previously been difficult or unclear.
The Ministry aims to foster an environment where small businesses and manufacturers can benefit from tax exemptions, especially in sectors with low profit margins.
Furthermore, the regulations address exemptions for small businesses and promote ease of compliance for manufacturers, with clear guidelines on which transactions and sectors are eligible for deductions.
Notably, businesses that do not provide a Tax Identification Number will face a doubled deduction rate for eligible transactions.
The regulations specify that various entities, including government ministries, statutory bodies, and public authorities, are mandated to deduct taxes at source for eligible transactions. However, small companies with a turnover of N2 million or less in a calendar month and possessing a valid TIN are exempt from this requirement
The Deduction of Tax at Source (Withholding) Regulations, 2024, reflect the government’s ongoing efforts to modernise Nigeria’s tax system, reduce inefficiencies, and encourage compliance across various sectors.
Source: Punch
