The federal government has categorised all electricity companies, including the Generation and Distribution Companies (GenCos and DisCos), as those exempted from the payment of Withholding Tax in the country.
This was contained in the new Withholding Tax regulation document signed by the Minister of Finance, Wale Edun, a copy of which was seen by our reporter.
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) serves as a prepayment of Income Tax deducted at rates between 5 and 10 per cent depending on transaction.
Withholding Tax was introduced into Nigeria’s tax system in 1977 as an advance payment of Income Tax on specified transactions.
However, Oyedele said the tax system provided the government with a steady revenue stream and helped curb tax evasion, but that the regime had expanded over time, becoming increasingly complex and burdensome.
He said the complexity led to ambiguities regarding 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.
