A Life in Tax: The Case of Tunde’s Small Business and the Withholding Tax Exemption Tunde had always dreamed of running his own business. After years of working in the finance department of a large corporation, he finally took the leap and registered TundeTech Solutions Ltd, a small IT consulting firm. Given the size of his operations, his company was classified as a small company under Section 105 of the Companies Income Tax Act (CITA)—meaning its annual turnover did not exceed ₦25 million. One afternoon, Tunde received a call from Aisha, his longtime friend and owner of Aisha & Co., a boutique accounting firm. "Tunde, I need your IT services for a software upgrade. We have a budget of ₦1.8 million for this project this month," Aisha said excitedly. "That sounds great!" Tunde responded. But then came the tax question. Aisha’s Concern: Do I Deduct Withholding Tax? Aisha, being a seasoned accountant, immediately thought about Withholding Tax (WHT). As per tax regulations in Nigeria, businesses are generally required to deduct WHT before making payments for goods and services. "Tunde, do I need to deduct WHT before paying you?" she asked. Tunde, who had been keeping up with recent tax regulations, recalled reading about an exemption for small companies in the latest WHT Regulation. "Actually, Aisha, my company qualifies as a small company under Section 105 of CITA. The regulation states that if a small company or an equivalent unincorporated body is making a payment, it is not required to deduct WHT, provided that the supplier (you) have a valid Tax Identification Number (TIN) and the transaction amount is ₦2,000,000.00 or less within a calendar month," he explained. Aisha checked her records. Her firm had a valid TIN, and the transaction value was below ₦2,000,000.00. "Ah, that’s true! So I don’t have to deduct WHT from this transaction," she confirmed. What if a Big Company Was Involved? Just as Aisha and Tunde finalized the deal, Tunde got another call—this time from LagosTech Innovations Ltd., a large tech company that wanted to engage his services for a ₦1.5 million IT project. This time, Tunde knew things would be different. LagosTech was not a small company—it was a large corporation with annual revenues exceeding ₦100 million. "Tunde, we’ll deduct 5% WHT from your payment as required by law," their finance manager informed him. Tunde understood immediately. The exemption only applies when the payer is a small company. Because LagosTech was a big company, it was still required to deduct WHT, even though the transaction was below ₦2,000,000.00. "That’s fair," Tunde replied. He made a mental note to file for WHT credit with the tax authorities later. Lessons from the Story As Tunde wrapped up his calls, he reflected on the key takeaways: Small companies and similar unincorporated bodies are exempt from deducting WHT if: The supplier has a valid TIN. The transaction is ₦2,000,000.00 or less within a month. Big companies must deduct WHT, regardless of the supplier’s size or the transaction amount. Knowing tax regulations helps businesses avoid unnecessary deductions and stay compliant. Tunde smiled. Understanding tax laws didn’t just help him save money—it made doing business smoother. That’s life in tax! Olatunji Abdulrazaq CNA, ACTI, ACIArb(UK) Founder/CEO, Taxmobile.Online