Small Businesses Get Relief, But Suppliers Without TIN Face Tougher Penalties
Firms without a Tax Identification Number (TIN) will no longer qualify for exemptions under Nigeria’s new Withholding Tax regulations, which took effect on January 1. The reform aims to simplify tax compliance for small businesses while tightening the rules for suppliers without proper documentation.
Under the updated policy, small businesses with annual turnovers of up to ₦25 million are exempt from paying Withholding Tax. However, they are still required to deduct the tax when making payments to suppliers who lack a TIN. If a small business fails to comply, it risks facing administrative penalties or additional interest charges for late remittance.
Suppliers receiving payments exceeding ₦2 million per month are also ineligible for the tax exemption. Additionally, businesses dealing with suppliers without a TIN must record their National Identification Number (NIN) for individuals or the Registration Certificate (RC) number for companies. In such cases, the applicable Withholding Tax rate is doubled, though this does not affect investment income like dividends, interest, or rent.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reform Committee, emphasized that the reforms aim to improve compliance while supporting small enterprises. “These measures are designed to strike a balance between promoting compliance and ensuring business continuity for small enterprises,” Oyedele said.
Key provisions include exemptions for small businesses engaged in manufacturing, agriculture, or production activities. Transactions involving instant electronic payments or cash sales are also exempted.
In a bid to reduce administrative burdens, small businesses are no longer required to file monthly Withholding Tax returns unless they made deductions in the previous month. Discussions are ongoing to potentially raise the turnover threshold for small businesses from ₦25 million to ₦50 million, providing further relief.
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