Nigeria reduces the rate of withholding tax on building construction

25 February 2015
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Global Tax Alert
Nigeria reduces the rate of
withholding tax on building
construction and related
activities
Reduction in the withholding tax rate1
The Nigerian Finance Minister, in exercise of her powers,2 has issued new
withholding tax (WHT) regulations to amend the Companies Income Tax (Rates etc.,
of Tax Deducted at Source (Withholding Tax)) Regulations, 1997.
These new regulations reduce the WHT to be deducted at source for all aspects of
building, construction, and related activities from the previous rate of 5% to 2.5%.
However, payments relating to survey, designs and deliveries in relation to
construction and building projects will not benefit from the reduced WHT rate of
2.5% but remain subject to withholding tax at the prevailing rate.
Commencement date
The new regulations are cited as the Companies Income Tax (Rates etc., of Tax
Deducted at Source (Withholding Tax)) Amendment Regulations, 2015 and have a
commencement date of 1 January 2015.
Implications
These new regulations require further scrutiny to be undertaken in determining
the applicable WHT rate on certain construction projects executed under a single
contract covering related activities such as surveys, designs and deliverables with
composite fee payments as different WHT rates may apply to different aspects of
the contract. Taxpayers responsible for making payments under such contracts
must therefore analyze them properly before applying WHT as it presents contract
structuring and planning opportunities.
Endnotes
1. Statutory Instrument (S.I. No 2 of 2015).
2. Section 81 (8) of the Companies Income Tax Act, Cap C21, Laws of the Federation of Nigeria, 2004.
For additional information with respect to this Alert, please contact any of the following:
Ernst & Young Nigeria, Lagos
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• Chinyere Ike
• Ogochukwu Isiadinso
• Oluwawatumininu Familusi
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Ernst & Young Advisory Services (Pty) Ltd., Johannesburg
• Justin Liebenberg +27 11 772 3907
justin.liebenberg@za.ey.com
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
• Leon Steenkamp +44 20 7951 1976 lsteenkamp@uk.ey.com
• G
► onçalo Dorotea Cevada +44 20 7951 2162
gcevada@uk.ey.com
Ernst & Young LLP, Pan African Tax Desk, New York
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► ele A. Olaogun +1 212 773 2546
• M
► zukisi Ndzipo +1 212 773 9917
Global Tax Alert
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