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From Adanna Nnamani, Abuja
The Federal Inland Revenue Service (FIRS) has clarified that the 10 per cent withholding tax on interest earned from treasury bills and other short-term securities is not a new tax, but part of efforts to enforce existing tax laws.
This clarification follows public reactions to a recent directive instructing banks, stockbrokers, and other financial institutions to deduct 10 per cent withholding tax on interest payments from instruments such as treasury bills, corporate bonds, promissory notes, and bills of exchange.
Technical Media Assistant and Head of Broadcast Unit to the FIRS Executive Chairman, Arabinrin Ogunleye-Bello on her X handle on Wednesday, wrote: “It is a tax law and neither a new development nor new tax. FIRS has no power to introduce new taxes, we are only enforcing compliance. People working in financial institutions know better.”
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The directive, earlier announced by the FIRS, reinforces Sections 78(1) and 81(1) of the Companies Income Tax Act (CITA), as amended, and the 2024 Withholding Tax Regulations.
Under the rule, interest earned on Federal Government bonds remains exempt, while the 10 per cent withholding tax applies to other short-term securities and is deducted at the point of payment. Investors are entitled to tax credits for amounts withheld unless the deduction is deemed final.
FIRS Executive Chairman, Zacch Adedeji, had earlier urged financial institutions to comply fully with the directive, warning that defaulters risk penalties and interest charges as provided by law.
The agency said the enforcement drive is aimed at promoting transparency, improving tax compliance, and boosting government revenue without introducing new taxes.
