What is Withholding Tax in Nigeria?

Withholding Tax is a payment of tax on account to be applied as tax credit against the Income Tax Liability of the year to which the income that suffered the deduction relates. It is deductible at the point of payment or when credit is taken whichever comes earlier for the specified activity.

What Law Enables Withholding Tax in Nigeria?

Sections 60, 61 62 of Companies Income Tax Act and Sections 69 to 72 of Personal Income Tax Act 1993 and Gazette Extraordinary No 74 Vol. 84 Part B of 12th August, 1997.

Who Pays Withholding Tax in Nigeria?

Withholding Tax is to be paid by individuals who are either in employment or are running their own businesses under a business name or partnership, communities, families and any trustee or executor under any settlement, trust or estate deemed to be resident in the State at a particular year.

Who Deducts Withholding Tax in Nigeria?

(a.) Corporate or unincorporated bodies.
(b.) Government Ministries,  Local Governments, Departments or Agencies.
(c.) Statutory bodies, Public Authorities, Institutions and Organizations.

Does States' Board of Internal Revenue (SBIR) collect Withholding taxes?

Yes. (SBIR) collect Withholding Tax of Individuals, Corporate and unincorporated bodies in their various States of Residence

Does Federal Inland Revenue Service (FIRS) collect Withholding taxes?

Yes. (FIRS) collect Withholding taxes of Limited and Public Liability Companies all over the country

What is the Mode of Payment for Withholding Taxes in Nigeria?

Tax withheld shall be remitted within 30 days or the date the duty to deduct arises whichever is earlier.

What are the Tax Exemptions for Withholding Taxes in Nigeria?

The following deductions are exempted from WHT Taxes:

(a.) Where a manufacturer buys raw materials from a supplier of those products which the manufacturer uses in his production line.
(b.) Where the manufacturer delivers its normal line of products to its distributors and agents for sale.

Is there a penalty for failing to remit Withholding Taxes in Nigeria?

(a.) Failure to deduct Withholding Taxes attracts a fine of 200% of the Tax not Withheld.
(b.) Failure to remit Withheld Tax within the stipulated time attracts a fine of 200% of the Tax Withheld but not remitted.

What are the rates of Withholding Taxes in Nigeria?

The rates for Withholding Tax are as shown in the table below:

Transaction type  Tax rate for companies  Tax rate for individuals
All aspects of building construction and related activities 5% 5%
All types of contracts other than sale and purchase of goods 5% 5%
Consultancy services 10% 5%
Management services 10% 5%
Technical Services 10% 5%
Commissions 10% 5%
Rent (including equipment hire) 10% 10%
Royalties, Director’s fees 10% 10%
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