FG exempts insurance premium, others from new withholding tax regulations

The Federal Government has exempted insurance premium, compensating payments under a Registered Securities Lending Transaction, among others from its new withholding tax regulations commencing January 2025. 

Other notable exclusion in distribution or dividend payment to a Real Estate Investment Trust or Real Estate Investment Company, across-the-counter transactions and interest and fees paid to a Nigerian bank by way of direct debit of the funds which are domiciled with the bank.

The official gazette also revealed that goods manufactured or materials produced by the person making the supply, imported goods where the transaction does not create a taxable presence in Nigeria for the foreign supplier and any payment in respect of income or profit which is exempt from  tax.

The Government in its “Deduction of tax at Source (Withholding) regulations, 2024” stated that   objectives of the  regulations are to set out the rules for the deduction of tax at source from payments to taxable persons under the Capital Gains Tax Act, the Companies Income Tax Act, Petroleum Profits Tax Act, and the Personal Income Tax Act in relation to specified transactions, adding that it is meant to adopt global best practices in the deduction of tax at source.

Other objectives include, reducing the rates of deduction for sectors with low margins, providing exemptions for small businesses and manufacturers, promoting the ease of tax compliance and administration,,  curbing tax evasion and reducing arbitrage between corporate and non-corporate business structures.

According to the new regulations, tax to be deducted at source include, “The eligible transactions and the applicable rates at which deductions shall be made at source are as specified in the “First Schedule” to these Regulations.

“Reduced rates as specified under a Treaty between Nigeria and any other country for the avoidance of Double Taxation shall apply to an eligible recipient who is resident in a treaty country to the extent that such reduced rates are contained in the relevant Treaty or protocol duly ratified by the National Assembly.

“In the case of supply of goods, rendering of services or any eligible transaction involving non-passive income, the amount to be deducted at source shall be twice the rate specified in the Schedule where the Recipient has no Tax Identification Number.”

On Offences, it stated that   person required to make a deduction at source under the relevant Act or under these Regulations who fails to do so, is liable to a penalty prescribed in section 40 of the Federal Inland Revenue Service (Establishment) Act or section 74 of the Personal Income Tax Act, as may be applicable.

“Where a person who is required to deduct at source fails to do so and has paid such a portion representing the required deduction to the recipient, only an administrative penalty shall be due and payable.

“Where a person has deducted an amount at source and failed to remit to the relevant tax authority, the amount so deducted in addition to an administrative penalty and annual interest shall be payable in line with applicable legislation,” it added. 

The Chairman of the Presidential Committee on Fiscal Policy, Taiwo Oyedele had  stated that  that the new withholding tax regulations is now gazetted by the federal government.

He emphasized that the implementation will begin, effective immediately from Wednesday following the approval from all tiers of government.

According to Oyedele, the new regulations are expected to provide some succor for manufacturers as well as small businesses in the country.

“I do have some good news. The good news is that the withholding tax regulation has now been gazetted. The only reason  why it hasn’t been published today is because it’s a public holiday. So first thing tomorrow, you’ll see a copy of the gazette. 

“And that provides a lot of relief not only for manufacturers, but also for every other businesses in terms of taking away some of the burden about funding their working capital, even their interest rate,” he noted