Experts have emphasized the importance for small and medium-scale enterprises to carefully manage their documentation and agreements in order to avoid unnecessary tax liabilities.
This advice was shared during the first edition of the United Bank for Africa Knowledge Series webinar, titled “2024 Withholding Tax Regulations: Specific Emphasis on How They Affect SMEs,” held in Lagos.
The webinar provided an invaluable platform for experts to delve into the implications of the new withholding tax regulations, equipping businesses with the knowledge to navigate the changing tax environment and thrive in 2025 and beyond.
The Head of SME Banking at UBA, Babatunde Ajayi,
alongside financial analysts Adeyemi Adeniran and Vincent Okoukoni from Anderson Consulting, shared practical insights and strategies.
These strategies were focused on helping SMEs not only comply with the new regulations but also minimize financial burdens while seizing opportunities for growth.
The session clearly aimed to empower SMEs with the tools they need for long-term success in an evolving regulatory landscape.
Adeniran explained that the newly proposed withholding tax regulations are designed to tackle inefficiencies that existed in the previous tax regime.
The updates aim to streamline the process, ensuring more efficient and timely tax remittances.
Adeniran said, “What this means is that while individuals and companies are required to pay their taxes at the end of the year, the government is saying, through withholding taxes, that it cannot wait until the end of the year to collect these taxes because it has immediate obligations. Therefore, as transactions occur between parties, the customer is required to withhold a portion of the tax and remit it to the government, rather than wait until year-end.”
“This regulation addresses the fact that, for the past few years, there have been no significant changes to the withholding tax mechanism, which has created certain challenges and inefficiencies,” He added.
Adeniran highlighted that SMEs need to fulfill two key conditions under the new withholding tax regulations. First, businesses must be registered with the tax authority to be compliant. Second, the transaction amount in any given month should not exceed N2 million.
Okoukoni pointed out a significant benefit of the 2024 withholding tax regulations for SMEs: businesses with an annual turnover of less than N25 million are exempt from tax deductions on payments received.
He continued, “For SMEs, the new regulations brings a significant benefit. If your business has an annual turnover of less than N25m, your customers are not required to deduct taxes from the payments they owe you.
“This means you receive the full payment, which directly improves your cash flow. It’s a positive development for SMEs, as it allows them to retain more funds to support and grow their operations.”
Head of SME Banking at UBA, Babatunde Ajayi, stressed UBA’s dedication to supporting SMEs in light of the new withholding tax regulations.
