Federal Ministry of Finance issues Withholding Tax Regulations (2024)

The Federal Ministry of Finance issued a New Withholding Tax Regulation which becomes effective from the 1st of July 2024.

What is withholding tax?

Withholding tax is a tax deducted at source from payments made to a taxable person for the supply of goods and services. However, it is not another form of tax but rather an advanced payment of income tax.

Here is a simplified summary of the key points from the Deduction of Tax (Withholding) at Source Regulation 2024 published by the Federal Ministry of Finance in Nigeria:
Deduction of Tax (Withholding) at Source Regulation 2024 – Simplified

Withholding Tax Rates:
Dividends, interest, and rent: 10%
Fees for professional services: 5%
Director fees 15%
Contracts for goods and materials supply: 2%
Contracts for project execution: 5%

Withholding Tax Exemptions:
Payments to government agencies and departments
Payments to diplomatic missions and international organizations
Payments for goods and services exported from Nigeria
Across the counter transactions
Insurance premium

Withholding Tax Certificates:
Certificates must be issued to recipients within 30 days
Certificates are required for recipients to claim tax credits

Compliance and Remittance:
Withholding tax must be deducted at the time of payment
Deducted tax must be remitted to the tax authority within 30 days
Failure to deduct or remit can result in penalties and interest

Record-keeping and Reporting:
Detailed records of deductions and remittances must be maintained
Annual withholding tax returns must be filed with the tax authority

Dispute Resolution:
Taxpayers can file objections or appeals against assessments
The tax authority will review and respond to the objections or appeals
This simplified summary covers the key aspects of the Deduction of Tax (Withholding) at Source Regulation 2024.