The Deduction of Tax at Source (WHT) Regulations 2024 represents a significant overhaul of the Nigerian tax landscape, introducing several changes that have far-reaching implications for businesses and individuals.
Expanded Tax Base: The Regulations in the first schedule provides list of eligible transactions and applicable rates. It further provides for transactions except from deduction at source.
WHT not an Additional Contract Cost: WHT shall not be regarded as a separate tax or an additional cost of the contract but treated as an advance or final tax payment.
Clearer Compliance Requirements: The Regulations provides clear and simplified implementation rules. Clarification on Persons required to deduct at source: The Regulations clearly list entities required to deduct WHT at specific rates on eligible transactions.
The Value Proposition
Reduced WHT for Bussineses with Low margin: This leads to encouragement of small business and medium enterprise.
Tax Credit: issuance of receipt for tax deductions which helps taxpayer to claim tax benefits, gives assurance to taxpayers and covers them from liability.
Administrative Burden: Compliance with the different tax rates can be time consuming, diverting resources from core business activities to avoid exposure due to different tax rates.
Uncertainty: Ambiguous provisions can lead to disputes with tax authorities, potentially resulting in penalties and interest charges.
Course of Action
Review Contracts: Assess existing contracts to identify potential WHT implications and renegotiate terms if necessary.
Update Tax Compliance Processes: Implement new procedures to comply with the stricter WHT regulations.
Tax Planning: Explore tax planning strategies to mitigate the impact of increased WHT.
Seek Professional Advice: Engage with tax experts to understand the regulations and their implications for your business.
Monitor Regulatory Developments: Stay updated on any changes or clarifications to the regulations..
This regulation highlights the rules for the deduction of taxes from payments to taxable persons under the Companies Income Tax (CIT) Act, Tax (PPT) Act and Personal Income Tax (PIT) Act in respect of specified Petroleum Profits transactions.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
