General Knowledge: Withholding Taxes

INTRODUCTION:

So many people don't like to pay taxes. While the taxpayers have fallen into the habit of skipping some sources of income or tend to reduce the amount increment from the source of their income.

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Normally, don't like to hear the word 'tax' but would like to spend their money on every other things aside that tax. Lots of citizens get to deposit huge amount of money in banks and earn interest depending on their deposits, they equally own houses in different states and recieve monthly or yearly rent through their caretakers or directly to them. Some other people buy shares and get back dividends at the end of financial year, as well, authors recieve rank for those written books, these are equally sources of taxable income.

Government do not really know the total number of houses owned by every individual taxpayer and it will be pretty difficult for those taxpayers to tell about the number of houses they owe the rent recieved, the same applies to other things individuals gets to do with their money to earn profits.

Because of this circumstances and situations mentioned above, whereby taxpayers get to recieve taxable income but refused to unveil it, this only forced government to introduce ths tax called Withholding tax.

What Is Withholding Tax

Withholding tax can be described as an advanced tax whereby the payer of money deduce a certain percentage in law, right from the gross amount and pays the owner the amount remaining after deducting the tax. The withholding tax deducted is meant to be paid over the relevant tax authority within 30 days just after such deduction is made. It is absolutely not a separate income tax system but rather part of income tax.

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When "withholding tax" was initially introduced, a few items were covered at the rate of about 12 and half percent on the gross amount. Durung that time, it was payable through interest, rent, royalties and dividends.

In the year 1985, government got to decree No 4 of 1985 through the finance, broaden the scope and presented in few other activities which should as well suffer withholding tax at the required rates for various companies.

While In 1987, government got to introduce withholding tax at a particular rate to include some economic activities of individuals, executors, community and family etc...

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Activities	Rate At Which Tax Is To be Deduced
•Professional services and consultancy	5%
•Technical services	5%
•Every aspects of construction, building, civil work and other familiar activities	5%
•Commission services	5%
• Management services	5%

N|B: Only if there's a serious implementation of this subject "Withholding Tax" based on the finance (Miscellaneous Taxation Provision) decree No4 of 1985.

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