The Federal Government has begun implementing the Tax Reform Act 2024, marking efforts to improve Nigeria’s new tax system.
The new reforms were approved by President Bola Tinubu in July 2024 and announced at the Ministry of Labour in October and will come into effect on January 1, 2025.
The new rules, dubbed the Tax Deduction at Source (Withholding) Regulations 2024, are designed to streamline the process, reduce inefficiencies and ease administrative burdens on businesses.
The changes specifically target small and medium-sized enterprises, manufacturers, producers and farmers, who are considered critical to the stability and development of Nigeria’s economy.
The Head of the Tax Reform committe, Taiwo Oyedele, announced on his X (formerly Twitter) account that the new tax regime was implemented on New Year’s Day “as part of normal taxation”, according to the budget. The Income Tax Reform Law of 2024, which is a law and tax reform, was approved in July 2024, announced at the Ministry of Labor in October 2024, and will enter into force on January 1, 2025.
He also touched on various changes made in the new law. These include exempting SMEs from tax breaks and a proposal to simplify the management of hardships and fiscal constraints, thereby encouraging growth and innovation in the economy.
Businesses with lower profits will benefit from lower withholding taxes, a move that aims to increase revenue and reduce operating costs.
These new rules exempt producers, manufacturers and farmers from tax cuts, a move that aims to strengthen these essential businesses and help them achieve long-term success and growth.
The reforms also simplify the process of getting tax relief on loans, making it easier for businesses to get good loans.
The new rules address long-standing issues such as confusion over cut-off periods and unclear definitions of key terms, removing barriers that previously made it difficult to operate.
The reforms also aim to stop tax evasion, shorten tax exemption periods and increase tax transparency. News sites had previously reported that the government had announced new tax policies aimed at reducing the tax burden on the manufacturing sector and small businesses.
