Dr. Titilayo Fowokan, a tax expert, has expressed excitement about the recently gazetted withholding tax regulation titled ‘The Deduction of Tax at Source (Withholding) Regulations, 2024’, stating that it is consistent with international best practices in taxation and will improve business operations and economic transparency.
Fowokan, the first female President of the Association of Certified Fraud Examiners, ACFE, Lagos Nigeria Chapter, declared in a statement sent to Vanguard that the alignment will improve the efficiency and effectiveness of tax collection in the country, which will take effect on January 1, 2025. She continued: “The revised legislation offers rate reductions and full withholding tax exemptions for businesses, including SMEs with annual turnovers up to N25m.”
“The regulation clarifies the application of withholding tax for unincorporated entities, particularly those operating in the informal sector, explaining that transparency aims to eliminate confusion and ensure that these businesses understand their tax obligations,” Fowokan told reporters. According to her, “It also distinguishes between resident and non-resident businesses operating in Nigeria, increasing the ease of doing business.”
The policy clearly distinguishes between Nigerian and international enterprises, ensuring that all entities comply with tax requirements. It describes specific procedures for transactions in Nigeria, emphasising how WHT is used differently between connected and unrelated enterprises.”
Fowokan emphasised the importance of educating the public about their rights and responsibilities under the new WHT regime in order to improve compliance, noting that withholding tax is an advance payment of income tax rather than a separate tax, and cautioning that non-registered taxpayers still have tax obligations and may face penalties for noncompliance.
“As a service provider, taxes are deducted from your payments and sent to the tax authority, serving as a credit against your annual tax liability,” she told me. She further stated that the new rule ensures that WHT does not exceed a company’s profit margin, allowing low-margin businesses to pay as little as 2% on their transactions. She saw the development as an important step towards safeguarding and recognising low-income enterprises, similar to procedures in other nations.
Fowokan stated that, while the new regime raises responsibility for taxpayers, it ultimately brings significant benefits. “The WHT schedule now requires taxpayers to distinguish between related-party and third-party transactions, follow vendors from countries with double taxation arrangements, and document deductions. Withholding agents must also fill out documents to verify deductions and remittances for suppliers’ credit claims, she noted.
