More hard times for investors as FIRS orders banks, brokers to deduct 10% withholding tax on interest from treasury bills, others

By Desire Emmanuel

The Federal Inland Revenue Service (FIRS) on Tuesday, October 28, directed banks, stockbrokers and other financial institutions to deduct 10 per cent withholding tax on interest earned from investments in short-term securities such as treasury bills, bills of exchange, promissory notes, among others.

Prior to this directive, short-term bills were tax-exempt to boost return for investors and the new directive requires tax to be deducted at the point of payment on such short-term instruments.

It was unclear how much the government expected to generate from the withholding tax, as report by Reuters News Agency cannot confirm.

Many investors usually snap up bills due to the attractive rates on the instruments and their short-term nature.

Investors will receive tax credits for the amounts withheld unless the deduction represents a final tax, FIRS said, but added that interest on Federal Government bonds remains exempt from the deduction.

“All relevant interest-payers are required to comply with this circular to avoid penalties and interest as stipulated in the tax law,” FIRS Executive Chairman, Zacch Adedeji, said in the notice sighted by Reuters.