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Tax experts have highlighted the critical role of proper documentation and agreements in helping Small and Medium Enterprises (SMEs) avoid unnecessary tax liabilities under the newly proposed withholding tax regulations.
This insight was shared at the inaugural edition of the United Bank for Africa (UBA) Knowledge Series webinar, with theme; “2024 Withholding Tax Regulations: Specific Emphasis on How They Affect SMEs,” held recently in Lagos.
Experts dissected the implications of the updated tax regime and provided strategic guidance to help SMEs navigate the evolving tax landscape in 2025 and beyond.
The panel featured Babatunde Ajayi, Head of SME Banking at UBA, Adeyemi Adeniran, financial analyst at Anderson Consulting; and Vincent Okoukoni, also a financial analyst at Anderson Consulting. The speakers offered practical strategies for SMEs to ensure compliance while optimising financial growth.
Adeniran explained that the revised withholding tax system is designed to eliminate inefficiencies in the existing framework while ensuring timely tax remittances to support government obligations.
“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,” Adeniran said.
He further noted that the withholding tax mechanism had not seen major updates in recent years, leading to inefficiencies that the new regulations aim to correct.
Highlighting the advantages of the updated tax policy, Okoukoni noted that SMEs with an annual turnover of less than N25 million would be exempt from tax deductions on payments received.
“For SMEs, the new regulations bring a significant benefit. If your business has an annual turnover of less than N25 million, your customers are not required to deduct taxes from the payments they owe you,” Okoukoni explained.
“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.”
Adeniran added that businesses must satisfy two key conditions:
“It must be registered with the tax authority, and in any given month, the transaction amount should not exceed N2 million.”
Reaffirming UBA’s dedication to supporting SMEs in adapting to the new tax regulations, Babatunde Ajayi, Head of SME Banking at UBA, said:
“At UBA, we will continue to ensure SMEs get the needed support to thrive and soar, especially under the new withholding tax framework. SMEs are not just businesses; they are innovators and risk-takers who play a pivotal role in shaping the future of the continent.”
Following the session, Alero Ladipo, Group Head, Marketing and Corporate Communications at UBA, lauded the discussion for equipping businesses with the knowledge to navigate the new tax regime effectively.
“At UBA, it is not just about banking; we are also passionate about helping our customers grow thriving businesses, and that is why we have launched this new series to increase the knowledge of our customers.”
