FIRS has directed banks, stockbrokers, and financial institutions to withhold tax on interest from short-term securities, warning of penalties for non-compliance.
RF Report
Nigeria’s tax authority, the Federal Inland Revenue Service (FIRS), has issued a directive mandating banks, stockbrokers, and other financial institutions to apply a 10% withholding tax on interest earned from investments in short-term securities.
Previously, these instruments, including treasury bills, corporate bonds, promissory notes, and bills of exchange, were tax-exempt to enhance investor returns. Under the new rule, the tax will be deducted at the point of payment.
The move could impact yield-seeking investors who are typically drawn to short-term securities for their attractive rates and quick maturity. However, FIRS clarified that investors would receive tax credits for the amounts withheld, unless the deduction is treated as final tax. Notably, interest on federal government bonds will remain exempt from this levy.
FIRS emphasised the importance of compliance, warning that penalties and interest would apply to those who fail to adhere to the directive.
