No TIN, No Mercy: New Withholding Tax Rules Unveiled for Small Businesses

By Achimi Muktar

Small businesses in Nigeria are waking up to a new era of tax regulation as the Federal Government rolls out a stricter Withholding Tax (WHT) regime. Under the reforms, which took effect on January 1, firms without a Tax Identification Number (TIN) will no longer enjoy exemptions from WHT, signaling a decisive step towards bolstering tax compliance and streamlining the fiscal landscape.

The new regulation offers significant relief to small businesses with low profit margins by exempting them from paying WHT. However, a crucial caveat demands that these businesses deduct and remit WHT when making payments to suppliers who lack a TIN.

The Rules in Detail

Suppliers receiving payments exceeding ₦2 million monthly will also forfeit their WHT exemptions. Failure to comply with the mandate to deduct WHT could expose businesses to hefty administrative penalties, while neglecting to remit the deducted tax may incur additional interest charges and fines.

For businesses dealing with suppliers without a TIN, the regulation prescribes using alternative identification such as the National Identification Number (NIN) for individuals or the Registration Certificate (RC) number for companies. However, in such cases, the applicable WHT rate is doubled, excluding payments tied to investment income like dividends, rent, and interest.

Tax Relief for Small Businesses

The reforms aim to ease fiscal burdens, boost cash flow, and create a more business-friendly environment. According to Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reform Committee, the new measures strike a balance between enforcing tax compliance and fostering growth among small enterprises.

Key highlights include:

Exemption from WHT: Small businesses with an annual turnover below ₦25 million—and potentially ₦50 million as discussions continue—are exempt from WHT under specific conditions.

Administrative Simplification: Businesses are no longer required to file monthly WHT returns unless taxes were withheld in the preceding month.

Sector-Specific Exemptions: Payments made to businesses in manufacturing, agriculture, and other production sectors are exempt from WHT, along with transactions involving cash sales or immediate electronic payments.

Protecting Small Businesses

The regulations safeguard small businesses from undue financial strain by prohibiting suppliers from inflating costs to offset WHT deductions. This ensures that tax obligations do not disproportionately affect their working capital.

Boosting Transparency

The reforms underscore the government’s commitment to fostering a transparent and accountable tax system. By clarifying rules and promoting compliance, the new WHT framework not only reduces regulatory bottlenecks but also creates an enabling environment for small businesses to thrive.

As discussions around raising the exemption threshold to ₦50 million gain momentum, businesses across the nation are urged to adapt swiftly to these changes. With clear guidelines and reduced administrative hurdles, the government is paving the way for sustainable growth while maintaining a robust tax structure.

The message is clear: Without a TIN, businesses risk losing vital tax exemptions. For small enterprises, the time to comply is now.