The Deduction of Tax at Source (Withholding) Regulation, 2024, was issued by the Federal Ministry of Finance, on July 1, 2024. It stipulates the rules for deducting taxes from payments to taxable persons in specified transactions. This article highlights relevant provisions of the Regulation.
1. Persons Who Must Deduct Tax at Source
These entities are required to deduct tax at source:
I. All corporate and unincorporated bodies
II. Government & MDAs (Ministries, Departments, and Agencies)
III. Statutory bodies and public authorities
IV. Any other institution, establishment or enterprise including those exempted from tax
V. Payment agents who act on behalf of these entities must also deduct tax at source.
Small companies or unincorporated entities with a gross turnover of 25 million Naira or less are also exempted if:
I. The supplier has a valid Tax Identification Number (TIN); and
II. The value of the specified transaction is less than N2,000,000.
2. Time to Deduct and Remit
I. Previously, there was no specific time to make deductions, except for passive incomes, which were deducted when the payment was made or credited. Now, deductions must be made at the earlier of these events: when payment is made, when the amount due is settled or when the liability is recognised (for related parties).
II. Remittances to the Federal Inland Revenue Services (FIRS) shall be due on or before the 21st day of the month after the payment.
III. Deductions payable to any State Internal Revenue Service (SIRS) with respect to Capital Gains Tax and Pay-As-You- Earn (PAYE) must be remitted on or before the 10th day of the month following the payment. All other deductions must be made on or before the 30th of the next month after the payment.
