The Federal Government of Nigeria has released the Gazette dated 2 October 2024 on deduction of tax at source (Withholding) regulations, 2024. These Regulations amends the previous withholding tax (WHT) rules except Pay-As-You-Earn (PAYE) tax.
It contains the following;
- transactions subject to deduction
- transactions that are not liable to deduction of tax at source in Nigeria or Nigerian WHT
- definition of across the counter transactions
- new WHT rates for foreign and resident persons.
- template for remitting and declaration to file WHT returns
- template for issuing receipt for amount deducted
Table showing withholding tax rates on qualifying transactions
| Transactions | Corporate Recipients | Non-Corporate Recipients | ||
|---|---|---|---|---|
| Resident | Non-Resident | Resident | Non-Resident | |
| Dividend, Interest | 10% | 10% | 10% | 10% |
| Royalty | 10% | 10% | 5% | 5% |
| Rent, Hire or Lease | 10% | 10% | 10% | 10% |
| Brokerage fee, Commission, consultancy, technical, management, and professional fees | 5% | 10% | 5% | 10% |
| Supply of goods or materials other than by the manufacturer or producer | 2% | N/A | 2% | N/A |
| Co-location and telecommunication tower services | 2% | 5% | 2% | 5% |
| Supply or rendering of services other than specific list in this Schedule | 2% | 5% | 2% | 5% |
| Construction of roads, bridges, buildings, and power plants | 2% | 5% | 2% | 5% |
| Other construction and related activities | 5% | 10% | 5% | 10% |
| Directors’ fees | N/A | N/A | 15% | 20% |
| Compensation for loss of employment | N/A | N/A | 10% | 10% |
| Entertainers and sports persons | N/A | 15% | N/A | 15% |
| Winnings from lottery, gaming, reality shows, etc. | N/A | N/A | 5% | 15% |
Implementation date of withholding regulations 2024 in Nigeria
The Gazette gives an effective date of 1st January 2025. Different revenue authorities, with the approval of the Finance Minister, can issue guidelines for following the new provisions and may adopt an earlier date of 1st July 2024. Federal Inland Revenue Service (FIRS) wants taxpayers to implement the regulations from 1st January 2025.
Transactions exempt from withholding tax in Nigeria
The following transactions are not subject to deduction of tax at source;
- compensating payments under a Registered Securities Lending Transaction;
- distribution or dividend paid to a Real Estate Investment Trust or Real Estate Investment Company;
- across-the-counter transactions, that is, any transaction between parties who do not have contractual relationship or formal arrangement and in which one party makes outright payment in cash or electronic medium;
- interest and fees paid to a Nigerian bank through direct debit of
the funds domiciled with the bank; - goods manufactured or materials produced by the person making the supply;
- imported goods where the transaction does not create a taxable presence in Nigeria for the foreign supplier;
- payment of income or profit which is exempt from tax;
- telephone charges, internet data and airline tickets;
- out-of-pocket expense that is incurred directly by the supplier and is separate from the contract fees;
- insurance premium;
- supply of Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Premium Motor Spirits (PMS), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO), Dual Purpose Kerosene (DPK), and JET-A1;
- commission retained by a broker from money collected on behalf of the principal according to the industry standard; and
- winnings from a game of chance or a reality show that promotes entrepreneurship, academics, technological or scientific innovation.