<\/p>\n
Our Reporter<\/p>\n
Finance Ministry has introduced new regulations for the deduction of tax from source.<\/p>\n
These regulations we gathered aren’t known as the Deduction of Tax at Source (Withholding) Regulations 2024, provide guidelines for deducting tax from payments made to taxable individuals and entities under various tax acts.<\/p>\n
According to the statement by Minister of Finance and Coordinating Minister of the Economy, Adebayo Olawale. “The implementation of these regulations will begin on July 1st, 2024. The regulations state that eligible transactions will be subject to deductions at specified rates, which vary depending on the nature of the transaction and the residency status of the recipient. Reduced rates will apply to recipients who reside in countries with which Nigeria has a treaty for the avoidance of double taxation.<\/p>\n
According to him entities such as corporations, government departments, statutory bodies, and payment agents are responsible for making deductions at source. However, small companies and certain unincorporated bodies are exempt from this requirement if the supplier has a valid Tax Identification Number (TIN) and the transaction value is N2,000,000.00 or less per month.<\/p>\n
The Minister said, It is important to note that deductions made at source should not be considered as separate taxes or additional costs. Instead, they are treated as advance or final taxes for the supplier. The obligation to deduct at source arises when payment is made or when the amount due is settled, whichever occurs earlier.<\/p>\n
He added that, once deductions are made, the amounts should be remitted to the relevant tax authority within specified timelines. Returns and evidence of remittance must be submitted, including information about the person from whom the deduction was made, the nature of the transaction, and the amount deducted”.<\/p>\n
“To ensure compliance with the regulations, receipts for tax deducted must be issued using a provided template. These receipts can be submitted to the relevant tax authority as evidence for claiming tax credit”.<\/p>\n
The Minister further stressed that failure to comply with the deduction requirements may result in penalties and interest charges. However, certain transactions, such as compensating payments under a Registered Securities Lending Transaction and dividend payments to Real Estate Investment Trusts or Real Estate Investment Companies, are exempt from deduction at source.<\/p>\n
The new Deduction of Tax at Source (Withholding) Regulations aim to simplify tax compliance and administration, reduce discrepancies between corporate and non-corporate structures, and align with global best practices. These regulations replace all previous rules regarding deductions at source, except for Pay-As-You-Earn tax.<\/p>\n
The Ministry of Finance expects that these regulations will promote easier tax compliance, ensure fairness in the tax system, and contribute to the overall economic development of Nigeria.<\/p>\n","protected":false},"excerpt":{"rendered":"
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