Banks begin charging taxes on bonds, T-bills as exemption expires
Nigerian banks have notified their customers that tax will now be charged on bonds and short-term securities on which tax is due, effective from January 2, 2022.
This followed the expiration of the Federal Government Finance Order 2011 which exempted bonds and short-term government securities from income tax for 10 years between 2011 and 2021.
One of the banks, Fidelity Bank, disclosed this in a notice to its customers on Wednesday, titled ‘government tax waiver on bonds expires’.
On December 9, 2011, President Goodluck Jonathan signed the Companies Income Tax Exemption Order 2011, which introduced tax exemption on T-bills and promissory notes, government and corporate bonds, and the interest earned on these instruments for a period of 10 years, starting from January 2, 2012.
Taxes will be charged on short-term Federal Government of Nigeria securities, such as Treasury Bills and promissory notes; bonds issued by state and local governments and their agencies; bonds issued by corporate bodies including supra-nationals; and interest earned by holders of the bond and securities, the bank said.
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“For clarity, please note that the two taxes due on income earned on investment (including that of short-term securities) are: Withholding Tax – a 10 percent charge that is deducted at source and is applicable to both individuals and companies income tax – applicable to only companies at 30 percent,” it said.
According to the bank, bonds issued by the Federal Government remain exempted from this regime as this was hitherto not taxable, and all investments in non-FG bonds, Treasury Bills, promissory notes and other short-term government securities shall now attract 10 percent deduction at source at maturity (withholding tax on interest).
“This is payable to the relevant tax authority in accordance with applicable tax laws for Personal Income Tax (for individuals) and Company Income Tax (for companies),” it said.