.jpg)
1. Withholding Tax (WHT) is an advance payment of income tax: "WHT is a tax collection mechanism that serves as an advance payment of income tax." It is "not a separate form of tax but an advance payment of income tax."
2. The primary legislation is the Deduction of Tax at Source (Withholding) Regulations 2024: "Nigeria’s Minister of Finance signed the Deduction of Tax at Source (Withholding) Regulations 2024, otherwise known as the 'WHT Regulations 2024'..." The regulations "replaced all prior rules for deductions at source other than Pay-As-You-Earn Taxes."
3. WHT is not a separate tax but a method of paying income tax in advance: "The Regulations clarify that WHT is not a separate tax..." It is "not a separate form of tax but an advance payment of income tax."
4. The payer (or "deduction agent") withholds the tax: "Withholding Tax (WHT) is a tax deducted at source from payments made to a taxable person..."
5. The system aims to combat tax evasion: "WHT was designed to curb tax evasion by widening the tax net, which in the long run improves overall tax revenue generation."
6. The responsibility to deduct WHT falls on a wide range of entities: The regulations require "all entities, including businesses, tax-exempt organisations, government ministries, departments, agencies, and their payment agents to deduct WHT on applicable transactions." This includes "A body, corporate or unincorporated... Government, Ministry, Department or Agency... [and] any other institution, organisation, establishment or enterprise including those exempts from tax."
7. Small companies are exempt from deducting WHT: "Small companies (i.e., companies that earns gross turnover of N25m or less per annum) are now exempted from the WHT deduction obligation where the following conditions are met: The supplier has a valid TIN. The value of the transaction is N2m or less during the relevant calendar month."
8. For unrelated parties, WHT must be deducted when payment is made: "For transactions between independent parties, the obligation to deduct at source shall arise at the earliest of when payment is made or the amount due is otherwise settled..." This is also described as "the earlier of when (i) payment is made or (ii) the amount due is otherwise settled."
9. Remittance to the FIRS by the 21st of the following month: "Federal Inland Revenue Service (FIRS) - the remittance to the FIRS remains due by the 21st of the following month."
10. Remittance to the relevant SIRS by the 30th of the following month: "State Internal Revenue Service (SIRS) - the remittance to the relevant SIRS remains due by the 30th of the following month."
11. It is the payer's responsibility to issue a receipt to the supplier: "The Regulations stipulate that it is the deduction agent’s (payer’s) responsibility, not the tax authority’s, to issue a receipt for the tax deducted to their vendor."
12. Failure to Remit (liable for the full amount, plus interest and penalties): "A taxpayer who fails to remit the amount that has been deducted shall be held liable for the WHT, along with any applicable interest and penalties..." The regulations specify that failure to remit incurs "an administrative penalty and annual interest (in line with the applicable legislation), plus the amount unpaid..."
13. Failure to Deduct (subject to an administrative penalty and annual interest): "A taxpayer that did not deduct WHT but paid their suppliers in full will be subject to administrative penalty and an annual interest..." The regulations state that failure to deduct attracts "an administrative penalty and one-off annual interest."
Key Legal Framework and Update
The main law governing WHT in Nigeria is the Deduction of Tax at Source (Withholding) Regulations 2024.
It is important to note a significant update regarding its implementation timeline:
Official Effective Date: While the regulations were initially announced with a July 1, 2024 commencement date, the officially gazetted version later stated that the new regulations would take effect from January 1, 2025. The Federal Inland Revenue Service (FIRS) has issued a notice confirming this, meaning the previous WHT regulations remain in force for corporate taxpayers until the end of 2024.
New Guidelines
The Federal Inland Revenue Service (FIRS) has issued new guidelines on how Withholding Tax (WHT) applies to interests earned from short-term investment securities.
In line with Sections 78(1) and 81(1) of the Companies Income Tax Act (CITA) and the Withholding Tax Regulations 2024, interest income payable to any person, including corporate and non-corporate entities, is now subject to WHT at the point of payment.
Key Highlights of the Directive:
- The law requires that a 10% Withholding tax is deducted from the interest you receive when your investment matures.
- The withholding tax deducted will be remitted directly to the relevant tax authority on your behalf, not later than the 21st day of the month following the month in which the payment occurred.
- Withholding Tax applies to both individual and corporate investors.
- A tax credit will be available for your records.
The following investment instruments are now subject to WHT (10%):
- Treasury Bills
- Corporate Bonds
- Promissory Notes
- Bills of Exchange
The following investment instruments are now exempt from WHT:
- Federal Government (FGN) Bonds
- Open Market Operation (OMO) Bills issued by the Central Bank of Nigeria
November, 2025.
.jpg&description=FEDERAL INLAND REVENUE SERVICE NEW GUIDELINES ON WITHHOLDING TAX (PART 2) | Lydia Ehisuoria Ohonsi Esq.){kind=link}
0 Comments