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.
The new Withholding Tax regulation document signed by the Minister of Finance, Wale Edun, explained that 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.”
It explained that 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.
According to the document, Withholding Tax was introduced into Nigeria‘s tax system in 1977 as an advance payment of Income Tax on specified transactions.
Oyedele said the tax system provided the government with a steady revenue stream and helped curb tax evasion, stressing 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, saying that the newly approved regime aimed to address the challenges and introduce several key changes.
