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EoDB: Federal Government exempts electricity GenCos, DisCos, others from Withholding Tax

Hon. Adebayo Adelabu, Minister for Power

*The Nigerian Government classifies electricity Generation Companies (GenCos) and Distribution Companies (DisCos) as part of firms exempted from the payment of Withholding Tax (WHT) in the country

Alexander Davis | ConsumerConnect

The Nigerian Government has classified all the electricity companies, including the Generation Companies (GenCos) and Distribution Companies (DisCos) as part of establishments exempted from the payment of Withholding Tax (WHT) in the country.

ConsumerConnect reports the development is also contained in the new Withholding Tax Regulation 2024 document, which Mr. Olawale Edun, Honourable Minister for  Finance and Coordinating Minister of the Economy, signed recently.

The country’s Federal Inland Revenue Service (FIRS) has described  Withholding Tax as one that serves as a prepayment of Income Tax deducted at rates between 5 and 10 percent depending on transaction.

Earlier, the Taiwo Oyedele-led Presidential Tax and Fiscal Policy Committee had proposed the new Withholding Tax Regulation 2024, which has equally exempted Small and Medium Enterprises (SMEs), manufacturers and farmers.

The implementation of the new WHT regulation reportedly took effect from July this year.

The objective of the new WHT Regulation is to address the challenges and introduce several key changes, stated Mr. Oloyede, Chairman of the Presidential Tax and Fiscalk Policy Committee.

The document further indicates the electricity and gas companies are categorised as “manufacturing” and “production”, and therefore, exempted from Withholding Tax.

According to FIRS, Withholding Tax was introduced into Nigeria’s tax system 1977 as an advance payment of Income Tax on specified transactions.

Explaining the rationale for the recent review of the WHT implementation in the Nigerian, Mr. Oyedele, Chairman of the Tax Committee, acknowledged the tax system had provided the government with a steady revenue stream and helped curb tax evasion over the decades.

He, however, explained that the Withholding Tax regime has expanded over time, becoming increasingly complex and burdensome on taxpayers.

According to Oloyede, the complexity led to ambiguities regarding compliance, eligible transactions, applicable rates and the timing of remittance.

The newly approved regime, therefore, is aimed at addressing identified challenges and introducing several key changes.

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