Farmers and small companies are exempted from the new withholding tax regime that the federal government has introduced.
This is because it brought about significant modifications to the prior tax system, including lower rates for companies with narrow profit margins and steps to stop tax evasion.
Taiwo Oyedele, the chairman of the presidential committee on fiscal policy and tax reforms, stated in a post via X on Tuesday that the gazette will be signed in the next few days.
He claims that the revised withholding tax regime has several important modifications, such as lower rates for companies with thin profit margins, steps to stop tax evasion and tax avoidance, exemptions for small enterprises from withholding tax, and clarification on the timing of deductions.
The post read: “Withholding tax was introduced into the Nigeria tax system in 1977 to serve as an advance payment of income tax on specified transactions.
“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 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.”
