TAX QUESTIONS What is the difference between VAT and WHT?
Questions
- What is the difference between Value Added Tax (VAT) and Withholding Tax (WHT)?
- What are the examples of goods and services that are changed to tax / vatable goods and services?
Answers
Value Added Tax (VAT)
Value Added Tax is a consumption tax paid when goods are purchased or when services are rendered. It is a multi-stage tax. Value Added Tax is currently imposed at the rate of 7.5% on the goods and services supplied by a vatable person. Before the Finance Act 2019, the Value Added Tax rate was 5%.
Withholding Tax (WHT)
Withholding Tax is different from Value Added Tax. Withholding Tax is a process of deducting tax at source and remitting the tax so deducted to the relevant tax authority. It is not another form of tax. Withholding tax is an advance payment of tax, which is deductible from the tax liability of the individual or group of individual or a corporate organization. The items of Withholding Tax and the rates are shown in Table A:
| Companies | Individuals | |
| Interest | 10% | 10% |
| Dividends | 10% | 10% |
| Rents | 10% | 10% |
| Director’s Fees | 10% | 5% |
| Royalties | 10% | 5% |
| Consultancy | 10% | 5% |
| Professional Services | 10% | 5% |
| Management Services | 10% | 5% |
| Technical Fees | 10% | 5% |
| Building Construction and related activities | 5% | 5% |
| Contracts and Supplies | 5% | 5% |
| Commission | 10% | 5% |
To make it much easier for you to keep accurate records for your business, the accounting software businessProfits is a solution that will be of help. If you need further clarification, please contact me at your earliest convenient time. My WhatsApp number is +2348022907640 or send a mail to adebola@sobanjointernational.com
Dr. Adebola Olubanjo