New withholding tax regime effective January 1, 2025 – FIRS

• Published On: 03 October 2024 at 18:15

The Federal Inland Revenue Service has informed taxpayers that the newly gazetted withholding tax regime will take effect on January 1, 2025.

In a notice signed by FIRS Executive Chairman Zacch Adedeji, the agency stated that the current withholding tax regime, as outlined in the Company Income Tax regulation, will be in effect until December 25, 2024.

The FIRS also urged citizens to follow tax payment regulations.

The notice states: "The Federal Inland Revenue Service ("the Service") hereby notifies taxpayers, tax practitioners, and the general public as follows:
1. The Deduction of Tax at Source Withholding (WHT) Regulations, 2024, published in the Federal Government Gazette, take effect on January 1, 2025.
2. The current WHT regime, as enshrined in the Companies Income Tax (Rates, ETC, of Taxes Deducted at Source (Withholding Tax) Regulations (S.I.10 of 1997), and relevant WHT provisions, remains in force until December 31, 2024."

Yesterday, the federal government published the new withholding tax regulation titled "The Deduction of Tax at Source (Withholding) Regulations, 2024."

This new regime seeks to repeal key provisions of the previous withholding tax regulation, which had been in effect since 1978.

Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, previously stated in June that the federal government had approved the new withholding tax regime, which was pending official publication.

The previous withholding tax system, established in 1978, faced several challenges, including ambiguity due to the expanded scope of transactions, which resulted in an increase in the number of taxes, inequities in the system, and pressure on the working capital of low-margin businesses.

The revised withholding tax regime includes significant changes, such as lower rates for low-margin businesses, measures to combat tax evasion and avoidance, exemptions for small businesses, and greater clarity on deduction timing and terms.