Nigeria Issues New Withholding Tax Regulations, Including Some Gambling Exemptions

July 9, 2024
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Nigeria’s Federal Ministry of Finance has issued new regulations for deducting taxes from a range of payments at their source, including winnings from games of chance.
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Nigeria’s Federal Ministry of Finance has issued new regulations for deducting taxes from a range of payments at their source, including winnings from games of chance.

The Deduction of Tax at Source (Withholding) Regulations 2024 were introduced on July 1; however, the changes affecting certain gambling winnings will come into effect from October 1, 2024.

Winnings from lottery, gaming and reality shows for non-corporate recipients are subject to a 5 percent withholding tax for residents and a 15 percent withholding tax for non-residents, according to the new rules.

The regulations include a host of transactions exempt from withholding tax, including “winnings from games of chance or a reality show with contents designed exclusively to promote entrepreneurship, academics, technological or scientific innovation”.

A PwC report on the changes warned it may be “technologically and financially burdensome to implement a solution that is able to account for withholding tax on certain gaming operations (especially casino activities)”.

“Operators in the industry generally prefer for taxes to be imposed on their operations as opposed to players’ winnings. There is a risk that gaming and lottery companies could revisit their business models in order to be competitive against illegal or foreign operators (who do not comply with the regulations),” PwC said. 

There are also “some ambiguities” regarding the legal drafting of how to apply the withholding exemption.

“The intention may be that the latter qualifying terms apply to both 'game of chance' and 'reality shows'. Any other interpretation would mean that all games of chance are exempt from withholding, which cannot be the intention of the regulations as these activities are included in the withholding table (included in the regulation),” PwC said.

“Other practical concerns are whether promotions like raffles would be considered an entrepreneurial game of chance or whether tax should be accounted for on non-monetary winnings.”

The regulatory changes have been introduced to improve tax compliance, as well as help address different existing issues flagged by corporations and individuals, such as a lack of clarity over when to pay and exemptions.

Nigeria's government recently awarded Yuan Resources Limited a controversial 15-year concession to deploy a revenue assurance platform for the lottery and gambling sector, in a bid to stop revenue leaks from the industry and improve oversight.

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