Features/Characteristics of Withholding Tax

• It is a deduction at source: which gives the taxpayer no option as to whether to pay or not
• It is an advance payment on income tax for which credit will be granted at the time the total tax liability is determined.
• Withholding tax cannot be used to offset any other type of tax except income tax
• Withholding tax deduction from Frank Investment income is regarded as the final tax.
• For a non-resident taxpayer, withholding tax is regarded as final tax on dividend, interest, rent, and royalty.
• Withholding tax credit is first utilized in the year of assessment the income relates; before it can be used to settle future years tax liabilities.

Withholding Tax is deductible from the following sources:

• Dividends
• Interest
• Rent (including hire of equipment and lease)
• Director’s fees
• Royalties
• Consultancy & Professional Services
• Management Services
• Technical Services
• Commissions
• Building Construction & Related activities
• Contracts of Supplies (other than sales in the ordinary course of business).