Withholding Tax

Rate of withholding tax

The section of CITA and PITA that provide for the deduction of withholding tax peg the rate for deducting tax on interest, rent, dividend and directors fees at 10% each. Federal government gazettes on withholding tax however contain a more comprehensive list of taxable payments and applicable rates at the bottom of this page

 

Penalty for non payment

 

Section 64 of CITA provides that "any person who being obliged to deduct any tax under section 60, 61, 62 or 63 of this act fails to deduct or having deducted fails to pay to the board within twenty one days from the date the amount was deducted or the time the duty to deduct arose, shall be guilty of an offence and shall be liable to a penalty of 1o% per annum of tax deduction plus at the prevailing commercial rate."

 

Section 73 of PITA makes a similar provision to the one quoted above, except that it allows up to 30 days from the date of deduction or the day the duty to deduct arose before remittance.

 

Remittance Procedure

 

CITA and PITA require every organization that withholds tax to account for the tax so deducted with a schedule detailing for the following information:

1. The name of the tax payer

  1. The name of the tax payer
  2. The nature of transaction from which payment is due.
  3. The total amount due to the tax payer.
  4. The rate of withholding tax applied.
  5. The amount of tax withhold and the period to which the remittance relates

With the above details the relevant tax authorities are expected to prepare and deliver withholding tax credit advices to each and every beneficiary contained in the schedule.

 

All ministries, departmental, extra ministerial department, commercial and non governmental organization are to be guided accordingly.

S/N Type of Payment Rate for companies (%) Rate for non-corporate (%)
1 Dividend, interest, rent 10 10
2 Royalties 15 15
3 All aspects of building construction and related activities 5 5
4 All types of contract and agency arrangement other than outright sale and purchase of goods and property in the ordinary course of business. 5 5
5 Consultancy and professional services 10 5
6 Management Services 10 5
7 Commissions 10 5
8 Technical Services 10 5
9 Directors fees 10 10