Nigeria’s Withholding Tax Regulations 2024: Matters Arising

They explore the latest updates, compliance issues, and potential legal challenges.

Key discussion points include updates to withholding tax rates and exemptions, challenges in enforcing compliance for non-resident entities, potential conflicts with international tax treaties, and available legal options.

See below the key takeaway from the discussion:

[0:35-1:29] Withholding Tax: Purpose & Compliance Withholding Tax (WHT) helps prevent tax evasion by ensuring that taxes are deducted at the source before payments are made.

[1:30-2:31] Key Updates in Withholding Tax Regulations 2024Revised Deduction Rates—directors’ fees increased from 10% to 15%. Exemptions and Threshold Adjustments:

• Small Company Exemption—payment is below ₦2M.
• Manufacturing Sector Relief—manufacturers supplying their own products.

[2:32- 2:56] New Penalties for Non-Compliance

• Failure to deduct and remit WHT: Subject to administrative penalties.
• Deducted but not remitted: A penalty of 10% of the WHT amount applies.

[2:57-4:24] Non-Resident Entities: Compliance & Enforcement Challenges

• Unclear Guidelines: The regulations lack clarity on WHT obligations for non-residents without a taxable presence.
• Limited Oversight: Enforcing compliance could be difficult due to regulatory constraints.

[4:34-6:53] Increased WHT for Non-Residents & Treaty Implications

• Higher Tax Rates: Non-resident directors are now taxed at 20%, while resident directors pay 15%.
• Possible Treaty Violation: This difference may conflict with non-discrimination clauses in international tax treaties.

[6:54-8:55] Options for Dispute Resolution:

• Mutual Agreement Procedure (MAP): Non-residents from treaty countries can negotiate with tax authorities.
• Tax Appeal Tribunal: Affected entities can challenge WHT assessments immediately.