The federal government through the Federal Inland Revenue Service (FIRS) has issued a new directive mandating banks, stockbrokers and other financial institutions to deduct and remit taxes on interest earned from short-term investments such as treasury bills, promissory notes, and corporate bonds.
In a notice released to guide banks, discount houses, brokers, and investors, the FIRS said the move is in line with the Companies Income Tax Act (CITA) and the newly approved Withholding Tax Regulations, 2024.
According to the directive, tax must be deducted from every interest payment made on short-term securities at the time the payment is made.
The deducted tax should then be sent to the relevant tax authority by the 21st day of the following month.
The notice also clarified that investors whose interest earnings have been taxed are entitled to a tax credit for the amount withheld, unless the tax is meant to be final.
