The federal government has approved a new policy exempting small businesses from withholding tax. This means businesses earning N25 million or less annually will no longer need to withhold tax from payments to suppliers or contractors.
Previously, withholding tax applied to a range of business transactions, with rates varying from 5% to 10%. This regulation created a burden for small businesses, especially those struggling with cash flow. The new policy aims to simplify tax compliance and free up resources for these businesses to grow.
This exemption is the first step in a series of tax reforms proposed by the presidential committee. The committee aims to create a more competitive and equitable tax system, while also ensuring proper tax collection. They plan to raise the exemption threshold to N50 million in the future.
Source: PUNCH