The Federal Government has approved the exemption of small businesses, manufacturers and farmers from paying withholding tax as a way of reducing the tax burden on businesses.
It also introduced key changes to the previous tax regime such as reduction of rates for businesses with low margins and measures to curb evasion.
The Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, Taiwo Oyedele, in a post on his official X handle on Tuesday, announced that President Bola Tinubu has approved the new withholding tax regime for the country with the official gazette expected to be signed in the coming days.
According to him, the erstwhile withholding tax system introduced in 1978 had challenges such as the ambiguity necessitated by the increase in transactions that it covered, thereby increasing the list of multiple taxes, inequity, straining the working capital of businesses with low margins, among others.
Withholding Tax is a method of collecting Income Tax in advance, deducted at rates ranging from 5 per cent to 10 per cent based on the transaction.
Returns are due by the 21st of the following month and the penalty for late filing is N25,000 for the first month and N5,000 for each subsequent month of non-compliance.
The tax expert further stated that 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 the timing of deductions and key terms among others.
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