FG says manufacturers, farmers, SMEs to stop paying withholding tax

• The exemption of small enterprises, farmers, and manufacturers has been authorized by the federal government
• Significant changes to the prior tax structure were also put into place, such as reduced rates for businesses
• Oyedele claims that the new withholding tax system includes a number of significant changes like low rates for businesses

Legit.ng journalist Zainab Iwayemi has over 3-year-experience covering the Economy, Technology, and Capital Market.

To lessen the tax burden on enterprises, the federal government has approved exempting manufacturers, farmers, and small businesses from paying withholding tax.

Income tax can be collected in advance through the use of withholding tax. Photo Credit: Ariel Skelley, PeopleImages
Source: Getty Images

Important modifications to the previous tax system were also implemented, including lower rates for companies with narrow profit margins and steps to prevent tax cheating.

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Income tax can be collected in advance through the use of withholding tax, which is withheld at rates that vary from 5% to 10% depending on the transaction.

New tax to be signed soon

President Bola Tinubu approved the country's new withholding tax regime, and the official gazette is anticipated to be signed in the coming days, according to Taiwo Oyedele, the chairman of the Presidential Committee on Fiscal Policy and Tax Reforms.

Oyedele made this announcement yesterday in a post on his official X handle.

He claims that the previous withholding tax system, which was implemented in 1978, had drawbacks, including unfairness, straining the working capital of companies with thin margins, and ambiguity resulting from the rise in transactions it covered.

According to Oyedele, the new withholding tax system has several important modifications, such as lower rates for companies with low profit margins, steps to stop tax cheating and avoidance, exemptions for small enterprises from withholding tax, and clarification on important words and deduction time.

He stated,

“As part of the ongoing fiscal policy and tax reforms, a new withholding tax regime has been approved. The key changes introduced are to address the identified challenges and specifically include the exemption of small businesses from withholding tax compliance and reduced rates for businesses with low margins.“Others are exemptions for manufacturers and producers such as farmers, measures to curb evasion and minimise tax avoidance.“Ease of obtaining credit and utilisation of tax deducted at source, changes to reflect emerging issues and adopt global best practices and clarity on the timing of deduction and definition of key terms.”

The latest approval is the second of five planned executive orders to reduce inflation and grow tax revenue.

Tinubu identifies 62 taxes paid by Nigerians

Legit.ng reported that president Bola Tinubu's administration is working to prune down taxes in Nigeria from the current 62 to a maximum of nine to create a business-friendly environment.

The Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, stated this at the 2023 Annual Conference of the Institute of Chartered Accountants of Nigeria (ICAN) in Abuja on Tuesday, October 10, 2023.

Oyedele, who asked the Nigerian government to remove VAT from diesel, said the step is essential as the current multiple tax system in the country has made tax administration difficult and ineffective.

Source: Legit.ng