The Federal Government has granted exemption from withholding tax to all electricity companies, including generation and distribution companies (GenCos and DisCos), across the country.
This decision is outlined in the new withholding tax regulation document signed by Minister of Finance, Wale Edun, and effective from July 1, 2024.
According to the document, electricity and gas companies fall under the categories of “manufacturing” and “production,” making them eligible for withholding tax exemption.
The regulations clarify definitions and provide context for their application.
The Federal Inland Revenue Service (FIRS) explains that withholding tax serves as a prepayment of income tax, deducted at rates ranging from 5% to 10%, depending on the transaction.
This move aims to streamline tax compliance and encourage growth.
Additionally, the newly approved regime exempts small and medium-sized enterprises (SMEs) from withholding tax, reducing their administrative burden. This change allows SMEs to focus on business expansion.
