Tinubu Approves New Withholding Tax Policy – ​​TrendyNewsReporters

Tinubu Approves New Withholding Tax Policy

President Bola Tinubu has approved a new withholding tax policy to replace the old one introduced in 1977.

The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, announced this on Tuesday, July 2. The new withholding tax policy introduces significant reforms designed to ease the heavy burden that the previous system imposed on farmers and small and medium-sized enterprises (SMEs).

According to Oyedele, the updated regime addresses several long-standing challenges and introduces specific provisions, including exempting small businesses from withholding tax compliance, reducing their administrative and financial burdens; businesses with low profit margins will benefit from reduced withholding tax rates, easing their cash flow and operating costs; and producers, particularly farmers, will receive exemptions, promoting growth and sustainability in these critical sectors.

Other new measures are aimed at improving compliance and reducing opportunities for tax evasion and avoidance. The policy simplifies the process of obtaining credit and using taxes deducted at source, making it more accessible for businesses.

The updates to the new withholding tax regime will reflect emerging issues and align with global best practices, ensuring that Nigeria’s tax system is modern and effective; furthermore, the new policy will provide clear guidelines on the timing of deductions and definitions of key terms, eliminating ambiguities.

Oyedele identified several issues with the previous withholding tax regime, which evolved over time to cover more transactions, leading to complications and unintended consequences. He said: “Businesses, especially small and medium-sized enterprises (SMEs), faced ambiguity regarding compliance, eligible transactions, applicable rates and timing of remittance.

This complexity has created an excessive compliance burden and strained working capital for low-margin companies.” Other challenges identified include the previous system treating withholding tax as a separate tax, adding it to the list of multiple taxes, and increasing management costs.

Obtaining refunds for excess withholding tax was problematic, causing additional financial strain on businesses. The lack of an exemption threshold made compliance costs uneconomical for taxpayers and enforcement costs high for tax authorities.

Furthermore, the overall structure of the old regime has promoted tax inequity, failing to effectively address emerging and contemporary issues. The new withholding tax policy is expected to bring significant relief and clarity to Nigerian businesses, promoting a more equitable and efficient tax system.

The approved regulations will be gazetted in the coming days, formalizing the changes and providing detailed guidelines for compliance. This reform marks a major step in Nigeria’s ongoing tax policy and tax reforms, demonstrating President Tinubu’s commitment to creating a more conducive environment for businesses to thrive.