The federal government has approved a new withholding tax regime, which exempts farmers and Small businesses.
This is as it introduced key changes to the previous tax regime such as reduction of rates for businesses with low margins and measures to curb evasion.
In a post via X on Tuesday, Taiwo Oyedele, Chairman of the Presidential committee on fiscal policy and tax reforms, said the gazette will be signed in the coming days.
According to him, 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.
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.” (DailyTrust)
