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Expert: New Tax Regulation Will Boost Business, Economic Transparency

Withholding tax regulation effective from January 2025 praised by tax expert

by Otobong Tommy
Expert: New Tax Regulation Will Boost Business, Economic Transparency

KEY POINTS


  • Lower withholding tax rates, exemptions for small businesses offered by new withholding tax regulation.
  • Resident vs non resident businesses still require some distinction, but the distinctions make compliance easier.
  • Understanding and compliance with WHT obligations would require public education on that effect.

Reacting to the development, tax expert Dr. Titilayo Fowokan has hailed Nigeria’s newly gazetted withholding tax regulation, ‘The Deduction of Tax at Source (Withholding) Regulations, 2024’, as a move that would help to bring more business transparency and nearer to international tax standards.

The intention is that the regulation, which will come into force on 1 January 2025, will streamline tax collection and boost compliance among both resident and non resident traders.

New withholding tax regulation: key features

Dr Fowokan notes that the revised regulation has lowered the withholding tax rate and gives exemption to businesses with annual turnover below ₦25 million, especially SMEs.

It also brings clarity to unincorporated entities in the informal sector who now have clarity in their tax obligations.

In addition, the regulation classifies resident and non resident businesses, which contributes to ease of compliance. It sets down procedures for transactions in Nigeria and dictates different treatment of related and unrelated parties.

Public awareness and compliance

In addition to stressing that the new WHT regime applies to all businesses, Fowokan also explained that withholding of tax is not a separate tax but an advance income tax payment.

This regulation, she explained, contains mechanisms to protect low margin businesses so that WHT doesn’t go beyond their profit margin something that is considered best practice in other countries.

The new demand of the updated regulation requires separating third party, and related party transactions, recording vendors from double tax countries and checking the deduction.

These measures are critical, Fowokan says, to the development of a transparent and efficient tax system, which will spur economic growth.

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