Public Notice on Deduction at Source of Withholding Tax

The Federal Inland Revenue Service (“FIRS”), in a Public Notice, issued a guidance to the public and taxpayers in general on Withholding Tax (“WHT”)
and Value Added Tax(“VAT”) deductible on Compensation/Commission due to distributors/dealers and/or agents.

By the notice, the FIRS has observed that some companies do not deduct WHT/VAT from the compensation and incentives paid to their distributors, which it said is contrary to the provisions of the Companies Income Tax (Rates, Etc.)

Deduction of Source (Withholding Tax) Regulations S.1 10 1997 (“the Regulation”), and Paragraph 3.8 of Federal Inland Revenue Service Information Circular No 2006/02 of February 2006 (“the Circular”) which states that “commission and other trade incentives earned by distributors/dealers will be subjected to WHT and VAT”.

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