President Bola Tinubu has approved a new withholding tax policy, replacing the outdated one approved in the 1977 regime.

Taiwo Ayodele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, announced the development on Tuesday.

The new policy aims to ease the burden on farmers and Small and Medium Enterprises (SMEs), which were heavily affected by the previous regime.

Ayodele said “Withholding tax was introduced into the Nigeria tax system in 1977 to serve as an advance payment of income tax on specified transactions. It was designed to provide the government with regular revenue flow and to serve as a means of curbing tax evasion.”

The new regime addresses issues including promoting tax equity and exempting small businesses from withholding tax compliance. Manufacturers, producers, and farmers will also enjoy exemptions, while businesses with low margins will benefit from reduced rates.

Other key changes include measures to prevent evasion and tax avoidance, ease of obtaining credit, and clarity on deduction timing and key terms.

The tax Reforms boss added that the new policy will be published in the official gazette soon.