The Federal Government has designated all electrical companies, including generation and distribution companies (GenCos and DisCos), as free from paying withholding taxes in the country.
This was disclosed in the new withholding tax regulation document signed by the Minister of Finance, Wale Edun obtained on Sunday, according to Nairametrics.
The tax and fiscal policy committee, led by Taiwo Oyedele, recommended the new withholding tax policy, which went into force on July 1, 2024.
According to the document, the electricity and gas companies are categorized as “manufacturing” and “production”, therefore exempted from the withholding tax.
The document’s Interpretation section states the following:
“In these Regulations, a word or an expression has the meaning assigned to it in the Act unless otherwise defined or where the context otherwise requires:
“the Act” means the Capital Gains Tax Act, Companies Income Tax Act, Petroleum Profits Tax Act, or the Personal Income Tax Act.
“Across-the-counter transaction means any transaction carried out between parties without an established contractual relationship or any prior formal contracting arrangement and in which payment is made instantly in cash or on the spot via electronic means.
“Connected persons shall have the definition under the Income Tax (Transfer Pricing) Regulations 2018.
“Manufacturing” or “production” means the assembling of a final product or the making of a part or component of a product utilising raw materials or other inputs including labour and production overheads. For these Regulations, the production of energy, including electricity, gas, and petroleum products shall qualify as manufacturing.”
However, the chairman of the tax and fiscal policy committee, Mr. Taiwo Oyedele stated that the tax system provided the government with a consistent revenue stream and helped reduce tax evasion; however, the regime had grown over time, becoming increasingly complex and burdensome.
According to him, the complexity resulted in uncertainties regarding compliance, eligible transactions, appropriate rates, and remittance timing.
He stated that the newly approved regime aimed to solve these issues and implement numerous critical improvements.
