There are many types of withholding taxes:

3% on payments by public institutions

5% on imports

15% on payments:

dividends, professional services, gambling winnings, royalties

To suppliers (of goods and services) who don’t have TIN and most recent CIT declaration

30% on directors sitting allowance:

Many of these taxes are beyond the scope of this lesson as they are usually dealt with by tax experts

We will focus on one type of withholding tax today: withholding tax on professional services

This tax applies to payments and other methods of extinguishing liabilities to suppliers do not have TIN numbers and don’t have their most recent CIT declaration.

Other withholding taxes are PAYE and 15% on casuals which will be handled in a separate section.

Similar to VAT, when purchasing a service, it is important to understand whether the services includes or excludes withholding taxes

Examples:

1.A company hires a lawyer as a consultant (individual who does not work for a company or does not have the most recent CIT declaration) to review some agreements. The company pays the lawyer 250,000 inclusive of withholding tax.  The company would pay the lawyer 212,500 (85% of 250,000) and remit 37,500 (15% of 250,000) of withholding tax to RRA.

2.In the first example, if the amount was 250,000 exclusive of withholding, the company would pay the lawyer 250,000 and remit 44,118 of withholding tax to RRA (250,000/85%*15%).

The withholding tax should be declared and paid to the RRA within 15 days of the month of the deduction