The Federal Inland Revenue Service FIRS has released an explainer on the objectives of the withholding tax, WHT, rates and its application in Nigeria.
WHT it said is an advanced payment of income tax and is not a type of tax on its own and does not confer any exemption on the filing of annual tax returns by a company that had suffered deductions.
The tax is usually deducted at source when a payment is to be made to beneficiary.
WHT regime is to capture more taxpayers into the tax net by ensuring that those who had hitherto evaded taxes would be made to pay up. The WHT regime is to ensure transparency.
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The application, rates and provision of the Withholding Tax in Nigeria covers transactions of resident companies or individuals and non-resident companies or non-resident individuals.
Tax Deduction in percentage
- Dividends, interest and rates
- Companies – 10%
- Individuals – 10%
2. Directors fees
- Companies – N/A
- Individuals – 10%
3. Hire of equipment
- Companies – 10%
- Individuals – 10%
4. Royalties
- Companies – 10%
- Individuals – 5%
5. Commision, Consultancy, Technical and Service fees
- Companies – 10%
- Individuals – 5%
6.Management fees
- Companies – 10%
- Individuals – 5%
7. Construction (road, buildings and bridges)
- Companies – 2.5%
- Individuals – 5%
8. Contracts other than sales in the ordinary course of business
- Companies – 5%
- Individuals – 5%
Returns for WHT are filed 21 days after the duty to deduct must have risens from companies. Failure to deduct or remit WHT attracts 10% of the amount not deducted or remitted.