Nigeria introduces sweeping tax reforms exempting small businesses, manufacturers, and farmers from withholding tax to alleviate financial strain. The changes also include reduced rates for low-margin businesses and measures to curb tax evasion.
The Federal Government has announced significant tax reforms aimed at alleviating the burden on small businesses, manufacturers, and farmers by exempting them from withholding tax. This decision, approved by President Bola Tinubu and set to be formalized in the official gazette soon, marks a departure from the previous withholding tax system introduced in 1978. Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, highlighted that the old system posed challenges such as ambiguity and inequity, particularly burdening businesses with low-profit margins.
Under the new regime, withholding tax rates will be reduced for businesses facing financial constraints, while measures to combat tax evasion and clarify deduction timelines are set to be implemented. Withholding tax, deducted at rates ranging from 5% to 10% on transactions, will no longer apply to qualifying small businesses, manufacturers, and farmers. Late filing penalties are set at N25,000 initially and N5,000 per subsequent month of non-compliance.
These reforms aim to streamline the tax system, enhance equity, and support economic growth by easing financial pressures on businesses. The announcement has been welcomed as a step towards fostering a more favorable business environment amidst ongoing economic challenges.
