Withholding tax and dividends

Posted by Felix Okoli on Wednesday June 19, 2013 at 11:48:38:

Have you noticed that when you receive your dividend payment, there is normally a 10% deduction on the actual payment made to you. That deduction is what we refer to as Withholding tax on dividend payments.

In Nigeria, there are several kinds of tax and one of them is withholding tax.

Taxes are one of the major ways through which the government generates revenue in order to carry out its responsibilities.

The government values taxes as very important and doesn't take too kindly to people who try to evade tax. Paying withholding tax is one of the responsibilities of the people involved in collecting such taxable money at source and the amount is remitted into the government's public accounts.
So, the company registrar of the company you invested in normally would deduct you withholding tax from the dividend that is finally paid to you in order to fulfill statutory requirements.

Withholding tax as the name implies is tax that is withheld at source from payments to be made to taxable persons in order to pay it into the govt's account later on. It is application to payment made for services and investment such as investment in the capital market.

Dividends are normally charged a tax rate of 10% before the actual payment is made to the investor by the company.

Let's assume you've got an investment of 10,000 units of shares in Access bank and the dividend declared for the year is N1, you will get to earn N10,000 as your dividend for that year but you will only be paid a final value of N9000 since N1000 would be deducted as withholding tax and paid to the government by the paying company.