A withholding agent is a person legally obliged to withhold tax on payment. To become a withholding agent, one must;
- Be on the list of selected / designated withholding agents published by the Minister of finance in a gazette or
- Be making a payment on a transaction that is subject to WHT by law.
NOTE: Withholding taxes may be final or creditable;
Final: Under the final withholding tax system, the amount of income tax withheld by the withholding agent is constituted as a full and final payment of the income tax due from the payee on the said income and
- The payee will not be subjected to further tax on such income
- The payee is not required to file an income tax return for the particular income that has faced final withholding tax
- That income is not aggregated with the other income of the taxpayer for the purposes of ascertaining chargeable income;
- No deduction is allowed for any expenditure or losses incurred in deriving the income and;
- No refund of tax shall be made in respect of the income.
Creditable: Under the creditable withholding tax system, taxes withheld on certain income payments are advance tax payments which are offset against a final tax liability in an assessment for a particular year of income. The payee may be required to file an income tax return to report the income and/or pay the difference between the tax withheld and the tax due on the income.