Starting on Saturday, January 1, 2025, winners of lotteries and reality shows, like Big Brother Naija, will need to pay a 5% tax on their winnings. This new rule comes from Wale Edun, Nigeria’s Minister of Finance and Coordinating Minister of the Economy.
According to an official announcement made on Wednesday, October 2, 2024, “winnings from lottery, gaming, reality shows, etc.” will have a 5% tax for Nigerians and a 15% tax for people from other countries.
The goal of these new rules is to make it easier to understand the taxes related to winnings and to encourage everyone to pay their fair share. It will also help reduce tax evasion and make it clearer which payments need to be taxed.
Earlier changes to these tax rules were introduced in July 2024, but they were supposed to start in October 2024. Now, while the rules from July and October are similar, the new tax for reality shows and lottery winners won’t start until January 1, 2025.
It’s important to note that reality show or lottery winnings won’t have tax taken out right away. Instead, winners will have to pay personal income tax after they receive their prizes.
This new tax announcement comes alongside a new tax Bill that has been in the news recently. One of the changes is that people working in banking, insurance, and other financial services will need to have a Tax Identification Number (TIN) to open or run a bank account. However, those earning only from investments won’t need a TIN but must share important information with tax officials.
Taiwo Oyedele, who leads the Presidential Fiscal Policy and Tax Reforms Committee, said that people who earn over ₦100 million each month will have to pay a higher personal income tax of 25%. He explained that it’s important to balance lower taxes for people with less income while ensuring that wealthier individuals pay their share. He pointed out that 90% of those who pay taxes in Nigeria shouldn’t actually be taxed.
To help small businesses, the new rules also state that businesses with transactions under ₦2 million won’t have to pay withholding tax.
When we look at taxes on lottery winnings in other countries, Nigeria’s 5% tax might seem small. For instance, in the US, lottery companies take away 24% in taxes, and winners often owe around 37% in federal income tax, which can leave them with less than half of their prize money. In many European countries, like France and Germany, lottery winnings are paid in full without any tax. Canada has similar rules.
However, in some other African countries, taxes on lottery winnings can be much higher. For example, in Kenya, the tax is 20%, and in South Africa, it’s 15%.
Taxes can be a sensitive topic in Nigeria, especially with many people facing economic challenges, so these new tax rules may not be welcomed by everyone.
