The tax is deducted by the payer from money due to a contractor, supplier or service provider and remitted to the tax authority on behalf of the recipient
By Moses Okorie
A tax expert, Ben Okonkwo, FCA, has called for a clearer understanding of Value Added Tax, VAT, and Withholding Tax, WHT, saying the two serve different purposes and should not be treated as the same tax.
Okonkwo, the Bursar of the African University of Science and Technology, Abuja, made the call in a report marking Nigeria’s 66th Independence Anniversary.
He explained that while VAT is a consumption tax imposed on taxable goods and services, WHT is primarily a mechanism for collecting income tax at source.
According to him, VAT is generally added to the price of taxable goods and services, collected by the supplier and subsequently remitted to the tax authority.
He noted that the standard VAT rate remains 7.5 percent.
On WHT, Okonkwo said the tax is deducted by the payer from money due to a contractor, supplier or service provider and remitted to the tax authority on behalf of the recipient.
He stressed that WHT should not automatically be considered an additional cost to the customer, as the amount deducted is, in many cases, credited against the recipient’s income tax liability.
The tax expert described the distinction in simple terms, saying VAT generally goes up on an invoice, while WHT generally comes down from the amount paid to the recipient.
Okonkwo also drew attention to changes introduced under Nigeria’s recent tax reforms, including adjustments to WHT rates, expanded input VAT provisions, small-business rules and electronic invoicing.
He urged businesses and contractors to properly classify their transactions and understand the applicable tax obligations to avoid errors, penalties and cash-flow challenges.
Okonkwo said improved understanding of VAT and WHT would help businesses comply with tax regulations and enable consumers, contractors and other taxpayers to better understand how the country’s evolving tax system affects them.