The organizations making the payments are required to withhold tax from such payments and pay over the withheld amounts to their respective relevant Tax Authorities within 30days of receipt of payment or credit by the person or entity suffering the Tax. The relevant tax authorities to receive the WHT tax transactions made by companies is FIRS and for individuals and unincorporated bodies subject to Rules of Residence is SIRS or FIRS.

Person liable to deduct withholding Tax

The payer of withholding tax in respect of any of the activities covered under the withholding tax regime shall include company (Corporate or non-corporate), Government Ministries and Department, Parastatals, Statutory bodies, Institutions and other established organization approved for the operations of Pay As you Earn System.

Who is Taxable

*All Persons, Companies etc. who’s Incomes are liable to income tax, are subject to Withholding Tax. *However, exempt entities like Educational Institutions, Government Ministries, Parastatals and other Agencies of Government, are Agents for the collection of WHT. They are required to deduct WHT on any payment made to a taxable body and remit same to the relevant tax authority.

Withholding Tax implication on foreign transactions

Non Resident Companies/Enterprises

The Revenue practice is that non-resident companies are not empowered to deduct any type of WHT. These categories of enterprises are practically outside the regulatory monitoring and control of the FIRS. It will be impracticable for Revenue office to inspect the accounting books of these companies in order to confirm due deduction and remittance of WHT.

Double Taxation Agreement (DTA)

Transactions that are ordinarily not liable to tax in Nigeria are not liable to WHT in Nigeria. Thus contracts and supplies of goods and services performed entirely outside Nigeria by non-resident individuals are not liable to WHT. 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 WHT rate. 7.5%. These countries include UK, Northern Ireland, Canada, France, Belgium, the Netherlands, Pakistan, and Romania.

Permanent Establishment (PE) principle exists under nigeria taxation

The rules construe a PE where:

*The company has a “fixed base” in Nigeria.

*The company operates in Nigeria through a dependent agent authorized to conclude contracts or deliver goods on its behalf,

*The company is executing a turnkey project in Nigeria, or

*The operation between the company and its Nigeria affiliate does not appear to be at arm’s length.

*“Fixed base” implies some degree of permanence and will include:

*Facilities, such as a factory, office, branch, mine, oil or gas well

*Activities, such as building, construction, assembly or installation.