The Federal Ministry of Finance has introduced new regulations that include significant tax exemptions for games, reality show winnings aimed at promoting entrepreneurship, academics, technology, and scientific innovation.
These exemptions, effective from October 1, 2024, apply to winnings from games of chance and reality shows specifically designed to foster these areas according to a copy of the document seen by Nairametrics.
Under the new regulations, winnings from such activities are exempt from the deduction of tax at source.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Adebayo Olawale Edun, announced these exemptions as part of a broader effort to stimulate innovation and academic excellence in Nigeria.
What the new regulations say
“ Winnings from a game of chance or a reality show with contents designed
exclusively to promote entrepreneurship, academics, technological or scientific
Innovation-“winning” for the purpose of these Regulations means the net payout to a participant in a game of chance.
“Where a winning involves a series of payments, the net payout shall be determined at the end of a session, not exceeding one calendar month.”
These exemptions aim to encourage participation and investment in activities that contribute to national development in these critical sectors.
The net payout is calculated at the end of a session, which must not exceed one calendar month. This ensures that participants are taxed fairly and only on the actual net gains received.
The introduction of these tax exemptions is part of a broader regulatory framework outlined in the “Withholding Tax Regulations 2024.” The regulations detail the processes and rates for tax deductions on various transactions, with these specific exemptions highlighting the government’s commitment to fostering a conducive environment for innovation and education.
What this means
Subsequently, popular reality shows like Big Brother Naija (BBNaija), which offer substantial prize money to winners, will benefit from these new tax exemptions.
For instance, the upcoming Season 9 of BBNaija, set to start on July 28, 2024, and last for 71 days, will see its winners not subjected to tax deductions on their prize money under this new regulation.
The 2024 edition, themed “Two Journeys in One House,” follows a tradition of significant cash prizes. Last season, housemate Illebaye walked away with N120 million, while the previous winner, Phyna, received N100 million.
Other categories such as all electricity companies including the generation and distribution companies (GenCos and DisCos) are part of those exempted from payment of withholding tax in the country.
More insights
Withholding Tax, which serves as a prepayment of Income Tax, is deducted at rates between 5% and 10% depending on the transaction type.
Withholding Tax was first introduced into Nigeria’s tax system in 1977 as an advance payment of income tax on specified transactions.
Over the years, it has provided the government with a steady revenue stream and helped curb tax evasion. However, the system has also become increasingly complex and burdensome.
Mr. Taiwo Oyedele, Chairman of the Tax and Fiscal Policy Committee, highlighted the issues with the current regime. “The tax system has expanded over time, leading to ambiguities regarding compliance, eligible transactions, applicable rates, and the timing of remittance,” he said.
To address these challenges, the newly approved regime introduces several key changes aimed at simplifying the tax process and reducing the burden on taxpayers.
The revisions are expected to clarify compliance requirements, streamline eligible transactions, and provide clear guidelines on applicable rates and remittance timing.
