By 
The Federal Government has rolled out new tax regulations aimed at alleviating the tax burden on Nigeria’s manufacturing sector and small businesses. This development was announced 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 2024 tax regulations are designed to simplify the process of tax deductions at the source for payments made to taxable individuals and businesses. The goal is to streamline tax compliance, reduce complexity, and ease the administrative burden on businesses, particularly in the manufacturing industry.
These regulations apply to payments under several key tax laws, including the Capital Gains Tax Act, Companies Income Tax Act, Petroleum Profits Tax Act, and the Personal Income Tax Act.
Key objectives of the new tax rules include promoting global best practices in taxation, reducing tax evasion, and curbing arbitrage between corporate and non-corporate business structures. In a statement, the Ministry of Finance explained, “The objectives of these Regulations are to set out the rules for the deduction of tax at source from payments to taxable persons under the relevant tax acts concerning specified transactions.”
The new rules address tax collection challenges in areas where enforcement has traditionally been difficult or ambiguous. The Federal Government is keen to create a business-friendly environment that offers tax exemptions for small businesses and manufacturers, especially those operating in low-profit margin sectors.
A significant provision in the regulations is the introduction of doubled deduction rates for businesses that fail to provide a valid Tax Identification Number (TIN). The ministry stated, “For transactions involving non-passive income, the amount to be deducted at source shall be twice the rate specified in the schedule if the recipient has no Tax Identification Number.”
Government ministries, statutory bodies, and public authorities are mandated to deduct taxes at source for all eligible transactions. However, small businesses with a monthly turnover of N2 million or less and possessing a valid TIN are exempt from this requirement.
One of the core principles of the new regulations is that tax deducted at source is not to be seen as an additional cost or a separate tax but rather as an advance payment towards the supplier’s final tax liability. This is intended to minimize the financial strain on businesses while ensuring compliance with tax laws.
The regulation clarifies, “A deduction made from a payment shall not be regarded as a separate tax or an additional cost of the contract or transaction.”
Businesses that fail to deduct or remit taxes at source will face stringent penalties, consistent with the penalty structure outlined in the Federal Inland Revenue Service (Establishment) Act and the Personal Income Tax Act. Companies that neglect to remit deducted taxes will incur penalties and interest as prescribed by law.
The regulations also provide exemptions for specific transactions, including compensatory payments under registered securities lending transactions, goods manufactured by suppliers, and telephone charges. These exemptions are designed to ensure that tax policies do not stifle business activities in critical sectors such as telecommunications, energy, and manufacturing.
The newly introduced tax regulations are part of the Federal Government’s broader strategy to support economic growth and ensure that Nigeria’s manufacturing sector remains competitive in the global market.
Comments