Pedabo raises concerns over WHT regulations, seeks actions to address grey areas

A leading tax consultancy firm, Kreston Pedabo, has raised concerns about the recently updated Withholding Tax (WHT) regulations in Nigeria, highlighting negative consequences for taxpayers.

In an analysis provided by Partner of Tax Services, Olubunmi Kuteyi, and Manager of Tax Advisory, Oluwasanmi Ogunsanwo, the firm pointed out several ambiguities in the new regulations that could lead to a crisis for taxpayers if not quickly addressed.

In July 2024, the Federal Government released an updated version of the WHT regulations to replace the longstanding 1997 guidelines. The initial publication of the new regulations, released on the letterhead of the Honourable Minister of Finance and Coordinating Minister of the Economy, was criticised for being unofficial and lacking proper distribution.

The situation has since been rectified with the formal publication of the document in an official gazette, along with minor revisions to the content.

While the updated regulations aimed at simplifying Nigeria’s WHT tax system, Pedabo has identified issues that could hinder its effectiveness.

The firm warned that if the issues are not resolved, they could create challenges for taxpayers and the broader tax administration.

One of the primary issues raised by Pedabo relates to the conflicting commencement and implementation dates in the WHT regulations.

The regulations are to take effect on 30 September 2024, while their official implementation is set for January 1, 2025.

This discrepancy, the firm said, may confuse, particularly for taxpayers who may be unsure of when to start complying with the new guidelines.

While the error may be a result of drafting oversight, Pedabo emphasised that the provisions must be clarified to ensure smooth adoption.

Pedabo noted that the updated regulations allow for early adoption from 1 July 2024, but that the guidelines surrounding the option for early application are not clearly defined.

The lack of clarity could lead to uncertainty among taxpayers, particularly regarding the administrative procedures necessary to apply the new regulations ahead of the official start date, he said.

Pedabo said: “The current provisions place the administrative burden of early application on the tax authorities, leaving taxpayers in a state of uncertainty. This has only been compounded by a recent public notice issued by the Federal Inland Revenue Service (FIRS), which lacks clear guidance for those who have already begun complying with the July version.”

In response to the release of the updated regulations, the FIRS issued a public notice clarifying that the 2024 WHT regulations would officially take effect from 1 January 2025.

But Pedabo said the notice does not provide clarity for taxpayers who had started implementing the new rates in July 2024.

“There are now questions over the status of deductions already made under the new rates since July. Would tax authorities refund taxpayers where higher rates have been deducted, or would they hold taxpayers liable where reduced rates have been applied ahead of schedule?”