- Dangote criticizes CBN’s 26% interest rate hike
- Urges govt to provide enabling environment for businesses to thrive
The Federal Government has announced the implementation of new tax rules for the deduction of tax from taxable persons under the Capital Gains Tax Act, the Companies Income Tax Act, Petroleum Profits Tax Act, and the Personal Income Tax Act in respect of specified transactions.
The implementation of the new regulations is contained in a document sighted by The Point, titled, “DEDUCTION OF TAX AT SOURCE (WITHHOLDING) REGULATIONS 2024,” signed by the Minister of Finance and Coordinating Minister of the Economy, Olawale Edun.
The document said the implementation commenced on July 1, 2024.
Assenting the authenticity and approval of the document, the minister stated, “In exercise of the powers conferred upon me by section 81(9) of the Companies Income Tax Act, section 56 of the Petroleum Profit Tax Act, section 73(6) of the Personal Income Tax Act, and of all other powers enabling me in that behalf, I, Adebayo Olawale Edun, Minister of Finance and Coordinating Minister of the Economy, hereby make the following regulations:
“The eligible transactions and the applicable rates at which deductions shall be made at source are as specified in the “First Schedule” to these Regulations.
“Reduced rates as specified under a Treaty between Nigeria and any other country for the avoidance of Double Taxation shall apply to an eligible recipient who is resident in a treaty country to the extent that such reduced rates are contained in the relevant Treaty or protocol duly ratified by the National Assembly.
“In the case of supply of goods, rendering of service or any eligible transaction involving non-passive income, the amount to be deducted at source shall be twice the rate specified in the Schedule where the Recipient has no Tax Identification Number.
“Persons required to make deductions at source (1) For the purpose of paragraph (1) of these Regulations, the following persons are required to deduct tax at source on eligible transactions.”
According to the document, a deduction made from a payment shall not be regarded as a separate tax or an additional cost of the contract or transaction. It shall therefore not be included in the contract price but treated as an advance or final tax of the supplier as the case may be.
The document stated that, “The obligation to deduct at source shall arise at the earliest of when: payment-is made, or the amount due is otherwise settled.
In the case of a payment due between related parties, deduction shall be made at the time of payment or when the liability is recognised, whichever is earlier.
“The amount deducted on any payment to a non-resident person shall be the final tax except where the income is liable to further tax by reason of a taxable presence in Nigeria.”
The amount deducted at source shall be remitted to the relevant tax authority as follows:
“In the case of payment to the Federal Inland Revenue Service, not later than the 21st day of the month following the month of payment.
“In the case of payment to a State Internal Revenue Service: I. with respect to Capital Gains Tax and Pay-As-You-Earn, not later than the 10th day of the month following the payment, with respect to any other deduction, not later than the 30th day of the month following the month of payment.
“Where an amount is deducted at source, the person making the deduction shall submit a return to the relevant tax authority with the evidence of remittance of the amount deducted as may be prescribed by the relevant tax authority from time to time.”
It added that, the submission shall be accompanied with a statement containing the following information in respect of the person from whom the amount was deducted, that is the:
“Tax Identification Number, National Identification Number, RC Number or its equivalent nature of transaction in respect of which the payment was made gross amount paid or payable amount of tax deducted in the calendar month to which the payment relates.”
Emphasising the need for preparation of documentation of tax payment, the new rule demands that, “A person who makes a deduction from any payment shall, upon remittance to the relevant authority, issue a receipt for the tax so deducted and a statement containing the following information, that is –
“The name, address and the Tax Identification Number (TIN) of the person from whom the deduction was made. Where the beneficiary has no TIN, such a person shall provide National Identification Number (NIN) in the case of an individual or RC number in the case of a company; the nature of transaction in respect of which the payment was made; the gross amount payable or settled the amount deducted; the month to which the payment relates.”
Under the new regulation, failure to make necessary tax deductions at sources or refusal to remit tax deducted constitutes an offence and offenders are liable to punishment as set out in section 40 of the Federal Inland Revenue Service.
“A person required to make a deduction at source under the relevant Act or under these Regulations who fails to do so or having deducted fails to pay to the relevant tax authority on or before the due date, is liable to a penalty as set out in section 40 of the Federal Inland Revenue Service (Establishment) Act or section 74 of the Personal Income Tax Act as applicable.
“Where a person who is required to deduct at source fails to do so and has paid such a portion representing the required deduction to the recipient, only an administrative penalty and one-off annual interest on the amount not deducted shall be due and payable.
“Where a person has deducted an amount at source and failed to remit to the relevant tax authority, the amount so deducted in addition to an administrative penalty and annual interest shall be payable in line with applicable legislation.”
However, some items are exempted under the new regulation, they are expressly stated below:
“The following transactions are exempt from deduction at source:
Compensating payments under a Registered Securities Lending Transaction in line with section 81(8) of the Companies Income Tax Act;
“Any distribution or dividend payment to a Real Estate Investment Trust or Real Estate Investment Company as provided under section 80(5) of the Companies Income Tax Act
“Across-the-counter transactions as defined under regulation 8 of these Regulations;
“Interest and fees paid to a Nigerian bank by way of direct debit of the funds which are 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;
“Any payment in respect of income or profit which is exempt from tax;
“Out-of-pocket expense that is normally expected to be incurred directly by the supplier and is distinguishable from the contract fees; among others.
Meanwhile, the government insisted that, “An exemption from deduction at source in this regulation shall not be deemed as an exemption from the relevant income tax except as provided in the enabling law.”
Dangote criticizes CBN’s 26% interest rate hike, urges government to provide enabling environment for businesses to thrive
Meanwhile, the Chairman and Chief Executive of the Dangote Group, Aliko Dangote, has said the latest increase in interest rate to almost 30 percent by the Central Bank of Nigeria will hurt local manufacturing businesses.
Dangote stated this during the opening session of a three-day National Manufacturing Policy Summit Organised by the Manufacturers Association of Nigeria at the Banquet Hall of the State House, Abuja on Tuesday.
“Nobody can create jobs with an interest rate of 30 percent. No growth will happen,” he said.
While delivering his address at the manufacturer’s summit, Dangote said no growth is foreseeable under such circumstances.
The business magnate also called on the government to protect existing businesses in the country, especially manufacturers by providing an enabling environment for them to thrive.
According to him, import-dependence equates to poverty importation.
“No growth will happen. No Power, no prosperity. No affordable financing, no growth, no development,” he explained.
Dangote argued that for the government to address the challenges of unemployment, poverty and insecurity, the manufacturing sector must be empowered to function optimally.
In his remarks, the President of MAN, Francis Meshioye said over 70 manufacturers have exited the sector between 2019 and 2022.
In attendance were Vice President Kashim Shettima and other government officials.
Dangote’s comments came weeks after the CBN’s Monetary Policy Committee, in May, agreed to increase the Monetary Policy Rate for the third consecutive time from 24.75 percent to 26.25 percent.
The Monetary Policy Committee held its 295th meeting on May 20-21, 2024 to review recent economic and financial developments in the country and to assess risks.
After the meeting it resolved to “Raise the MPR by 150 basis points to 26.25 per cent from 24.75 per cent,” the CBN Governor, Yemi Cardoso, who chairs the MPC announced.