The Federal Government has exempted all electricity companies, including Generation Companies (GenCos) and Distribution Companies (DisCos), from paying Withholding Tax.
This exemption is detailed in the new Withholding Tax regulation document signed by the Minister of Finance, Wale Edun.
The new Withholding Tax regulation was proposed by the Tax and Fiscal Policy Committee led by Taiwo Oyedele and took effect from July 1, 2024.
According to the document, the electricity and gas companies are categorised as “manufacturing” and “production” and therefore exempted from Withholding Tax.
According to the Federal Inland Revenue Service (FIRS), Withholding Tax (WHT) acts as a prepayment of Income Tax, deducted at rates between 5% and 10% depending on the transaction.
Introduced into Nigeria’s tax system in 1977, WHT serves as an advance payment on specific transactions.
Oyedele noted that while WHT provided a steady revenue stream for the government and helped curb tax evasion, its regime had become increasingly complex over time, leading to ambiguities about compliance, eligible transactions, applicable rates, and the timing of remittance.
He further said the newly approved regime aimed to address the challenges and introduce several key changes.
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