Nigeria’s New Withholding Tax Regulations Set to Impact Gaming Sector
The Federal Government of Nigeria has officially published the “Deduction of Tax at Source (Withholding) Regulations, 2024” (WHT Regulations) in the Federal Republic of Nigeria’s Official Gazette. These significant regulations, which were published on October 2nd, 2024, are poised to reshape the tax landscape, particularly affecting the gaming industry.
Effective from January 1, 2025, the WHT Regulations will be backdated to commence on September 30, 2024, adhering to the minimum 90-day notice period prescribed by the 2017 National Tax Policy for any alterations in tax legislation.
Once the new regulations come to play, eligible transactions for winnings from lotteries, gaming, and reality shows shall incur applicable rates of 5% for residents and 15% for non-residents with effect from 1st of January 2025. Nigeria Gaming Tax at Source
Earlier, the Federal Inland Revenue Service (FIRS) released a Public Notice confirming the regulations’ effective date and affirming that they encompass essential sectors, notably gaming. The regulations stipulate that winnings from games of chance, such as lotteries and other betting activities, will now have taxes deducted at source. It is believed that this will ensure that operators comply with tax obligations before distributing net winnings to players, significantly bolstering tax revenue from this rapidly growing segment.
Wale Edun, the Minister of Finance, made the regulations with a vision that they will simplify the process for taxpayers and also enhance compliance, and curb tax evasion, particularly relevant in the gaming sector where financial transactions can be complex. Regulation 10(1)(l) explicitly states that winnings from games of chance or reality shows designed to promote entrepreneurship and innovation are included in the withholding tax structure. Nigeria Gaming Tax at Source
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Importantly, Regulation 11(2) permits the FIRS and other relevant tax authorities to issue guidelines for implementing the WHT Regulations, with the possibility of allowing certain businesses to adopt these regulations earlier—beginning July 1, 2024. This provision aims to provide businesses with additional relief as they adjust to the new tax framework, reducing potential burdens associated with compliance.
The regulations provide defined withholding tax rates based on the type of transactions, ensuring that the gaming sector is aligned with broader tax practices across different industries. Exemptions are available for smaller businesses across various sectors, giving them a temporary reprieve from certain tax obligations, thereby promoting growth within the sector. Nigeria Gaming Tax at Source
For more details about the WHT Regulations, stakeholders and interested parties can access the official document through the Federal Ministry of Finance’s channels.
