The Federal Inland Revenue Service (FIRS) has declared that the existing Withholding Tax (WHT) regime will remain valid until December 31, 2024. This announcement was made via a public notice aimed at informing taxpayers, tax practitioners, and the general public about the impending implementation of new regulations regarding tax at source deductions. The new Deduction of Tax at Source Withholding Regulations, 2024, which was published in the Federal Government Gazette, will take effect starting January 1, 2025. FIRS Executive Chairman Zacch Adedeji confirmed that while these new regulations are on the horizon, the current WHT framework will continue to dictate tax deductions until the end of 2024, safeguarding continuity for taxpayers during this transitional period.
In detail, the notice highlighted that the transitional existing framework is based on the Companies Income Tax (Rates, ETC, of Taxes Deducted at Source (Withholding Tax) Regulations (S.I. 1.10 of 1997). This provision ensures that the general principles of WHT, as they have been governed for many years, remain in effect while allowing taxpayers and businesses to prepare for the upcoming changes. The FIRS emphasized the importance of compliance with existing tax laws, urging taxpayers to fulfill their obligations diligently under the current regime in the lead-up to the implementation of the new regulations.
The newly introduced regulations aim to alleviate the tax burden, particularly on the manufacturing sector and small businesses. This initiative was announced as a part of a broader strategy to enhance the business environment and optimize tax collections in Nigeria. The regulations, which were signed by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, focus on streamlining the processes governing tax deductions at source. By aiming to reduce complexities and enhance ease of compliance, the regulations intend to create a more business-friendly environment that encourages growth and investment in the economy.
Moreover, the Deduction of Tax at Source Withholding Regulations, 2024, will cover a spectrum of payments associated with various tax acts, including the Capital Gains Tax Act, Companies Income Tax Act, Petroleum Profits Tax Act, and Personal Income Tax Act. This comprehensive approach is designed to ensure that all relevant tax obligations are addressed and streamlined, thereby facilitating better adherence to tax laws by different sectors of the economy. The government hopes that these reforms will not only enhance tax compliance but also boost overall revenue generation.
The FIRS took the opportunity to reiterate the importance of the upcoming changes and the need for all stakeholders to stay informed. Taxpayers must engage with the new regulations proactively to avoid disruptions or compliance issues when these regulations come into full effect in 2025. Continued cooperation between the FIRS and the business community is essential to ensure that the regulatory environment remains conducive for growth while reinforcing the government’s commitment to fair and efficient tax practices.
In conclusion, the announcement by the FIRS marks a significant step towards modernizing the tax system in Nigeria. As the transition towards the new Withholding Tax regulations approaches, taxpayers and businesses are encouraged to remain compliant with current laws while preparing for the changes ahead. The government’s focus on supporting sectors like manufacturing and small businesses through these revised regulations underscores its commitment to fostering a robust economic environment. The ultimate goal is to create a tax framework that not only optimizes collection but also encourages compliance and economic growth in the years to come.
