Nigeria Introduces Withholding Tax on Gaming Winnings Starting January 2025

04.10.2024

The Nigerian Federal Government has announced new tax regulations that will affect the gaming sector, mandating tax deductions on winnings from lotteries, gaming, and reality shows beginning next year.

New Tax Regulations

On October 2, 2024, the Federal Government published the “Deduction of Tax at Source (Withholding) Regulations, 2024” in the Official Gazette. These regulations are set to alter the tax landscape, particularly impacting the gaming industry and related activities.

The new withholding tax regulations will take effect on January 1, 2025. However, they are backdated to commence from September 30, 2024, in accordance with the minimum 90-day notice period required by the National Tax Policy of 2017 for any changes in tax laws.

Under the updated regulations, winnings from gaming activities, including lotteries and reality shows, will be subject to a withholding tax. Residents will face a 5% tax rate, while non-residents will be taxed at 15%, starting from January 1, 2025.

The Federal Inland Revenue Service (FIRS) has issued a public notice confirming the effective date of the regulations. The notice emphasizes that the regulations cover key sectors, notably the gaming industry, and stipulates that taxes will be deducted at the source on winnings from games of chance.

Objectives Behind the New Regulations

The introduction of these tax measures aims to streamline the tax collection process and enhance compliance within the gaming sector. By deducting taxes at the source, the government intends to ensure operators fulfill their tax obligations before disbursing winnings to players, thereby increasing tax revenues from this rapidly expanding industry.

Regulation 10(1)(l) of the new rules explicitly includes winnings from games of chance and reality shows designed to promote entrepreneurship and innovation within the withholding tax framework. This inclusion signifies the government’s intent to regulate and tax all forms of gaming activities comprehensively.

Regulation 11(2) allows the FIRS and other relevant tax authorities to issue guidelines for implementing the withholding tax regulations. It also provides the option for certain businesses to adopt the regulations earlier, starting from July 1, 2024. This provision is designed to give businesses additional time to adjust to the new tax system and alleviate potential compliance burdens.

Support for Smaller Businesses

The regulations offer exemptions for smaller businesses across various sectors, granting them a temporary reprieve from certain tax obligations. This measure is intended to promote growth and provide support to smaller entities within the gaming industry and beyond.

By defining specific withholding tax rates based on transaction types, the new regulations aim to align the gaming sector with standard tax practices across different industries. This alignment ensures consistency in tax treatment and supports the government’s broader fiscal objectives.

Stakeholders and interested parties seeking more information about the withholding tax regulations can access the official documents through the Federal Ministry of Finance’s channels.