Administration of withholding tax 2 on july 14, 2014 12. Aug 07, 2018 the withholding tax rates in nigeria wht varies among individuals and companies corporate bodies. There are two main areas, based on the 2017 wbg report, which nigeria needs to address. Before 1930 there was nothing like a formal tax system or taxation in nigeria. The rates may be reduced under the provisions of an applicable tax treaty and qualifying payments to eu companies may be exempt under eu directives. Many jurisdictions also require withholding tax on payments of interest or dividends. According to firs there are nine9 types of taxes in nigeria. A withholding tax, or a retention tax, is an income tax to be paid to the government by the payer of the income rather than by the recipient of the income. Transactions that are ordinarily not liable to tax in nigeria are not liable to wht in nigeria. These levies were paid by market men and women, farmers, etc. Global edition is a free, personalized email subscription service that allows.
Interest payments are subject to final withholding tax of 20 % 15 % if on loan with term of one year or more, and 5% if on loan granted for development of certain infrastructure programs. Withholding tax is basically an advance payment of income tax which may be used to offset or reduce tax liabilities. The withholding of creditable tax at source or simply called expanded withholding tax is a tax imposed and prescribed on the items of income payable to natural or juridical persons, residing in the philippines, by a payorcorporationperson which shall be credited against the income tax liability of the taxpayer for the taxable year. Withholding tax makes it possible for tax payers to pay the government first before spending their income. The rate of withholding tax depends on the nature of payment. Flaws of the withholding tax system in nigeria part 1. Guidelines on administration of withholding tax in nigeria withholding tax is a tax leveled on income earners but made payable by the payer of the income rather than the recipient of the income. The bills proposed amendment removes the double taxation caused by edt, thereby encouraging corporate. These include value added tax, capital gains tax, withholding tax and stamp duties. Nov 19, 2019 the federal income tax is a payasyougo tax. Nigeria has treaty agreements with about eight 8 countries and these countries are granted a reduced rate of wht deduction, usually at 75% of the generally applicable withholding tax rate. Personal income tax in one of the types of taxes in nigeria that is levied by the federal government of nigeria what is personal income tax in nigeria.
Companies income tax cit petroleum profit tax ppt value added tax vat personal income tax pit withholding tax wht educational tax edt stamp duties std capital gains tax cgt. Apr 30, 2020 withholding tax is income tax withheld from employees wages and paid directly to the government by the employer, and the amount withheld is a credit against the income taxes the employee must pay. Nigeria pkf assurance, audit, tax, advisory and business. Federal inland revenue service firs we do our best to provide accurate and up to date information.
Corporate tax 2020 laws and regulations nigeria iclg. Each new month would add 5,000 naira to the original penalty of 25,000 naira per the first month. Relevant tax authority may assess and charge tax on the turnover of a business, etc. Tax policy forms the basis for tax laws while tax administration is the implementation of the tax laws. Nigeria is about 72% away from the best performance observed under the paying taxes subindex. Traditional rulers like kings and queens were the ones who collected some sort of levies ishakorle back in those days. Withholding tax is not a separate tax on its own and does not confer an exemption from the filing of annual tax. Meaning if your customer fails to remit n100k in withholding taxes already deducted from your invoice his penalty will be to pay n200k extra. Investment income derived from nigeria by a person resident outside the country is typically only liable to withholding tax. Value added tax vat in nigeria is levied on all products and services traded within the country and payable to government at a 5% rate, one of the lowest in the world. Withholding tax in nigeria is a form of advance payment of income tax. Individuals resident in nigeria are taxable on their worldwide income. It is an advanced payment of tax due on the transaction being done at the time of its deduction. The applicable laws on withholding tax in nigeria are sections 60, 61, 62 and 63 of the company income tax cita and sections 69 72 of the personal income tax pita.
As a matter of fact, arsenal has a higher chance of winning the champions league than a. Nigerian value added tax system and the concept of basic food article pdf available in ssrn electronic journal january 2016 with 7,575 reads how we measure reads. Yet, tax administration was found to have no insignificant effect on tax payment in nigeria tax system. Rate of withholding tax in nigeria the rates of withholding tax in nigeria varies among individuals, companies and corporate bodies.
Income tax is levied at progressive rates as shown below. A resident company is liable to tax on its worldwide income being its profits accruing in, derived from, brought into, and received in nigeria. The tax is thus withheld or deducted from the income due to the recipient. Nigerian value added tax system and the concept of basic food. The sale of real estate properties is subject to a 10% tax on the gains. Withholding tax rates in nigeria what is withholding tax wht withholding tax wht is the tax required by the law to be withheld by a party from each payment made to another contracting party from the income or services it rendered. Tax credit allowable against tax payable on income derived from outside nigeria. In principle, wht is a payment on account of the ultimate income tax liability of the taxpayer or company. A legal view of corporate taxation in nigeria please tell me more on the wht note. Withholding tax on companies, residents of the federal capital territory, abuja and nonresident individuals. Taxation in nigeria understanding nigerian tax system. In most jurisdictions, withholding tax applies to employment income. Taxation in nigeria understanding nigerian tax system oasdom. Withholding tax rate table nigeria companies individuals.
Welcome to the kpmg nigeria knowledge base of research that demonstrates our understanding of business challenges faced by companies in nigeria. Obviously, everything about the nigerian taxation cannot be covered in this article, so try to click the links provided on certain text to get a wider scope and explanation. Wht is not really a distinct tax type and therefore has no legislation of its own. Two very important types of tax in nigeria are value added tax vat and withholding tax wht and our emphasis today is the meaning and applicability of these taxes to your business.
These also vary amongst either the individuals or companies involved. There is a withholding tax wht of 10% which is applicable to dividend payments in nigeria. Withholding taxes from companies and those from residents of the abuja, fct, members of the armed forces, police force, and officer of nigerian foreign services are paid to federal inland revenue service, while those of the individuals are paid to the relevant states internal revenue service where the particular taxpayer resides. These countries include uk, northern ireland, canada, france, belgium, the netherlands, pakistan, and romania. This agreement shall also apply to any identical or substantially similar. Business or trade only partially carried on or deemed to be carried on in nigeria. Feb 09, 2017 withholding tax administration in nigeria. Withholding tax in nigeria as the name implies, is a tax withheld at source. In most cases, however, the withholding tax rates for individuals is anythin g from 5 percent to 10 percent while for companies, it is between 2. Withholding tax wht returns withholding tax returns must be. This file may not be suitable for users of assistive technology.
Withholding tax and sales in the ordinary course of business 11. However, tax authorities have been denying such requests and, after an amendment to. Nigeria foreign services, persons resident within the federal capital territory, abuja and persons employed in the nigeria police force other than in a civilian capacity are to pay their taxes to the federal inland revenue service. In particular, we focus on the tax treatment of luxembourg ucits. Taxpayers are subjected to intensive audits and even when the claims are certified, refunds are rarely granted. Taxation in nigeria plus history of taxation in nigeria. Capital gains tax on residents of the federal capital territory, abuja, bodies corporate and nonresident individuals.
Y in the case of withholding tax deducted from payments due to all limited liability companies, the relevant tax authority is federal inland revenue service firs. Personal income tax pit can be described as the income tax payable for any year of assessment upon the chargeable income of. Understanding and managing the apprehension of tax authorities sheraton hotel, ikeja 21 october 2014 interpretation and application of tax laws. Oct 08, 2019 withholding tax rates are usually 10% or 5% depending on the type of transaction and collecting authority for the tax which can be a federal inland revenue or the state inland revenue.
A person must withhold tax when certain types of payments e. You pay the tax as you earn or receive income during the year. Nigerian companies pay 30 percent of their worldwide profit while foreign companies pay 30 percent of only the profit made in nigeria. Rate on royalties increased from 15% to 20 % as from 1 january 2019. A withholding tax of 10% is deducted from the dividend paid by a nigerian company to a nonresident company. Withholding tax is not a separate tax on its own and does not confer an exemption from the filing of annual tax returns by the company which had suffered wht. As such, it is required to register for cit and file its tax returns. Withholding tax is a system of taxation that the government use as a means to combat tax evasion or tax avoidance by tax payers. Understanding withholding tax wht in nigeria completefmc.
If these types of taxes in nigeria are paid later than supposed, you would have to pay the penalty, an expensive one. It is an easier way to get more people to pay their tax and at a faster rate. The purpose of this circular is to draw the attention of the general public, ministries, parastatals and other agencies of government at federal, state and local levels to the government policy on the collection procedures for withholding tax wt and the value added tax vat by government and related establishment. A withholding tax payment, as a tax credit, allows the latter party mentioned above to claim it as part of its tax benefits when filing its year end tax returns. Doc tax incentives in the agricultural sector in nigeria. Additional information on withholding tax rates for the countries in this. In the case of employment, a nonresident person is liable to tax in nigeria if the duties of employment are wholly or partly performed in nigeria, unless. Double tax treaties dtts nigeria has dtts with the countries listed in the table below. Okay, the wht credit note is a document issued by a relevant tax authority to a beneficiary as evidence that withholding tax was deducted from its business. Tax table from 14 june 2011 where an individual does not have any chargeable income, or his chargeable income.
The 183 days residency rule for liability to nigerian tax. Explanatory notes on withholding tax administration in nigeria. Overview of personal income tax in nigeria explained. The educational charge is pegged at 2 percent of the assessable profit while the a 10 percent withholding tax is deducted from dividend payments to companies and individuals. Withholding tax wht is not a separate tax on its own and does not confer an exemption from the filing of annual tax returns by any company which had suffered wht deductions. Applicable taxes for investors and issuers in capital market transactions frequently asked questions i. Frequently asked questions and answers on withholding tax. Additional information on withholding tax rates for the countries in this document is available in the countryspecific documents in the. A resident person is assessable to tax on his global income, i. Nonresident companies providing professional, consultancy, management and technical pcmt services to nigeria residents will be subject to tax at 10% final tax where such company has a significant economic presence to be determined by the minister of finance in nigeria.
All taxes in nigeria are collected by nigeria s federal inland revenue service firs. Pdf nigerian value added tax system and the concept of. The tax treaties with south korea, spain, and sweden are still in the process of being ratified. It is a payment on account of the ultimate income tax liability of the taxpayer or company. Incorporating best practices in every transaction oriental hotel, lekki 16 september 2014 taxation of crossborder transactions. This framework referred to as edt, has generated many controversies in the nigerian tax space. Interest on loans paid by a nigerian company is often not subject to wht. For this 11 th edition we have looked at 125 countries and analysed the interest taxes, dividend taxes, capital gains taxes and withholding tax wht rates that apply to luxembourg sicavs and fcps based on their legal status as at january 2018. Pit, petroleum profit tax ppt, withholding tax, capital gains tax cgt, value added tax vat, customs duties and stamp duties.
This paper attempts to analyse the prospects of agricultural industry in nigeria by an indebt look on the agricultural potential in nigeria ranging from crop production to animal husbandry, the various tax incentives for the agricultural industries. A withholding tax is the tax required by law to be withheld by a party from each payment made to another contracting party from the income or services rendered. Pdf the purpose of this paper is to identify the influence of withholding tax wht on. Vat and withholding tax returns of the service recipientscustomers. Withholding tax withholding tax is basically an advance and indirect source of taxation deducted at source from the invoices of the tax payer. The rates may be reduced under the provisions of an applicable tax treaty and qualifying. We have decades of experience analyzing tax, audit and business data. Value added tax vat vat is a consumption tax levied on the supply of all goods and services supplied in or imported into nigeria, except those specifically exempted from the tax by the vat act and the firs information circular no 200702. Double tax treaty and nontreaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments.
Current law and practice of value added tax in nigeria. Nigeria also has tax treaties with kenya, mauritius, and poland. The conclusion from these two benchmarks is that nigeria needs to embark on a significant tax reform to improve its ranking. Kpmgs global network can help turn data into value. The pwc data card is a summarized pdf document that briefly states tax laws in nigeria and penalties for defaulting. As an advanced tax payment it is used later to reduce the amount of tax payable by such tax payer. Withholding taxes are however collected in advance of. Withholding tax in nigeria administration and rates. If youre an employee, your employer probably withholds income tax from your paycheck and pays it to the irs in your name. Excess dividend tax s 19, int eri m d ivid end s s 43. The tax is deducted by the investee company before remittance of dividends to.
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