Nigerian government to begin taxation of reality shows and lottery winners. Winners will be paying a 5% tax on their winnings in 2025. This is according to new withholding tax regulations by Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy.
According to the official gazette dated October 2, 2024, “winnings from lottery, gaming, reality shows, etc” will be subject to a 5% tax deduction for Nigerians and a 15% tax deduction from non-residents.
The objective of the new regulations is to clarify the rules of withholding tax under the Capital Gains Tax Act, the Companies Income Tax Act, the Petroleum Profits Tax Act, and the Personal Income Tax Act.
It is also expected to curb tax evasion and remove the complexities that come with deducting tax at source, making it clearer which kinds of payment are taxable and promoting tax compliance.
Meanwhile, the same changes were made to withholding tax regulations in July 2024 but were supposed to take effect in October 2024.
While the July 2024 changes remain the same as the recent ones in October 2024, the key difference is that taxation of reality shows and lottery winners will not start until January 1, 2025.
What this means for Big Brother Naija
Both regulations also maintain that reality shows or lottery winnings are not subject to tax from source, however, they are subject to personal income tax. This means that Big Brother Naija will not deduct withholding tax from the prize money, but the winners are expected to pay income tax after it has been received.
This new tax regulation coincides with the release of a new tax Bill that has made headlines in the past week.
One of the new tax reforms in the Bill is a requirement by individuals in banking, insurance, stockbroking, and other financial services to provide a Tax Identification Number (TIN) before opening or operating a bank account.
Individuals who earn only passive income from investments in Nigeria are exempt from this requirement but must submit relevant information to tax authorities.
Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee also revealed that high-net-worth individuals who earn over ₦100 million monthly will pay 25% personal income tax.
According to Oyedele, there needs to be a balance between reducing the tax burden for low-income earners and making sure that the rich pay more taxes. He also pointed out that 90% of people who pay tax in Nigeria are not supposed to be taxed.
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This is why he emphasised that the proposed tax reforms by the current administration are to ease the tax burden on businesses and individuals.
In the same vein, the new withholding regulations exempt small businesses with transaction values less than ₦2 million from paying withholding tax.
Tax on lottery winnings in Nigeria compared to other countries
Compared to some other countries, Nigeria’s 5% tax deduction on lottery wins could be seen as negligible. In the US, for example, the lottery company will deduct 24% withholding tax, while the winner still owes about 37% in federal income tax.
More tax obligations will usually leave the winner with less than half of the total prize money.
However, in many European countries like France, Germany, Italy, New Zealand, Finland, and the UK, lottery wins are paid in lump sums and are tax-free. This is also the same for Canada.
It is important to also note that some of these countries could deduct taxes based on the total amount of the lottery. In Italy, 20% tax will be deducted if the win is over €400. Spain will also do the same thing if the prize money is over €40,000.
Other African countries also have significantly higher deductions from lottery winnings. In Kenya, for example, winnings from lottery and even betting are subject to a 20% withholding tax, while in South Africa, it is subject to a 15% withholding tax.
Taxes have always been a touchy subject in Nigeria, and with the current economic difficulties being faced by many Nigerians, new tax deductions are likely to receive negative public sentiment.
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