ICANBusiness, Management and FinanceIntroduction to Finance and Financial Markets2024

Under the Finance Act 2021, withholding tax (WHT) deducted on dividends paid by a Nigerian company to a resident individual shareholder is treated as:

AA final tax, discharging the shareholder's entire income tax liability on that dividend income
BAn advance payment of Companies Income Tax (CITA) by the paying company
CA credit against the shareholder's Personal Income Tax (PITA) liability for the yearCORRECT
DA penalty imposed by the Federal Inland Revenue Service (FIRS) for late filing
AI
Toaster Teacher
Why the answer is C, and why the others tempt you.
Withholding tax deducted at source on dividends paid to a resident individual is not a final tax but rather a credit (advance tax) that the recipient can offset against their total Personal Income Tax (PITA) liability for the assessment year. The Finance Acts have progressively clarified the treatment of WHT credits. Option A incorrectly characterises WHT on dividends as a final tax (that treatment applies specifically to non-resident recipients under certain conditions), while B and D are factually incorrect.
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