Automated Market Makers (AMMs) are a decentralizedDecentralization refers to the property of a system in which nodes or actors work in concert in a distributed fashion to achieve a common goal.
Click to read more → exchangeBusinesses that allow customers to trade cryptocurrencies for fiat money or other cryptocurrencies.
Click to read more → protocol that allows users to trade cryptocurrencies without needing traditional order books. Instead of relying on buy and sell orders placed by users, AMMs use smart contracts and liquidityLiquidity indicates how easy it is to convert a cryptocurrency into cashCash is the most liquid form of money: physical coins and banknotes in the most narrow sense of the term.
Click to read more → quickly — and whether this can be achieved without the assetAssets are the resources that an organization can use to generate revenue or benefit.
Click to read more →’s value suffering.
Click to read more → pools to facilitate trades. If the term “Virtual Automated Market Makers (vAMMs)” has emerged since my last update, it could refer to an evolution or extension of the AMM concept with additional virtual or programmable features. These decentralized exchange protocols utilize liquidity pools and algorithms to enable users to trade digitalDigital technologies are these electronic tools that have the ability to generate, store or even process data.
Click to read more → assets directly from their wallets. Popular examples include Uniswap […]
Click to read more →Withholding tax is one topic that confuses many business people in Nigeria. Most people think it is a type of tax that companies or contractors pay.
But the truth is that withholding tax is simply an advance tax collection method. It is money that is withheld at the point of payment so that government collects part of your possible tax before the final assessment.
It is not a separate tax on its own. It is tax taken early.
So the real question is this. Who is responsible for paying withholding tax in Nigeria. And the answer surprises many people.
The Payer Is The One That Pays The Withholding Tax
The person paying for a service, contractIn traditional finance, a contract is a binding agreement between two parties. In cryptocurrencies, smart contracts execute functions on the blockchainA distributed ledger system. A sequence of blocks, or units of digital information, stored consecutively in a public database. The basis for cryptocurrencies.
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Click to read more → or transaction is the one required to deduct withholding tax and remit it. It is not the receiver that deducts it. It is the person paying out money for a service, rent or benefit.
So if a company pays a contractor one million naira for consultancy work. The company must deduct the percentage that applies and remit it to government. Then the contractor will receive his balance.
This is why withholding tax is called deduction at source.
The PayeeA payee is a party within an exchange of goods or even services that can receive payment.
Click to read more → Is The Beneficiary
The person receiving the money is the beneficiary. What this means is that the deducted withholding tax is assigned to his tax profile.
Later during tax assessment, the person can use the withholding tax credit to reduce his final tax bill. So if the contractor pays more tax at year end. The withholding tax helps to reduce what he owes.
This is why withholding tax credit notes are important for record keeping.
Who Are The Common People That Must Deduct Withholding Tax
Different kinds of people are responsible for deducting withholding tax. For example companies that pay suppliers or consultants. Government agencies that pay contractors.
Banks that pay commissions or interest in certain categories. Even private organisations or individuals paying professional fees can have a withholding tax responsibility depending on the category.
So almost anybody paying for a taxable service or contract is a potential withholding agentAn agent is a third party that has been given the legal right to represent a business (the "principal") and enter into contracts on that business' behalf.
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Which Payments Normally Attract Withholding Tax
There are many different categories that attract withholding tax. Some popular examples include contract jobs like construction or supply jobs.
Professional fees like accounting engineering legal or training. Rent in certain cases. Commissions brokerage interest royalties and other similar income streams.
It depends on the specific category and whether the transaction is resident or non resident. Rates can range between 5 percent and 10 percent in many common service categories.
Where Is Withholding Tax Remitted To
If the payment relates to a company or corporate income category. The withholding tax is remitted to the Federal Inland Revenue Service.
If the payment relates to personal income for individuals or partnerships. It is usually remitted to the State Internal Revenue Service for the state where the payee is under tax jurisdiction.
Understanding this distinction matters because remitting to the wrong authority can cause reconciliation issues later.
Timing Matters For Remittance
Withholding tax must not be held indefinitely. It must be deducted immediately at the point of payment. Then it must be remitted to the appropriate authority within the regulatedRegulation is when something is controlled by a specific set of rules.
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There are penalties for delayed remittance. And these penalties can be heavy because government sees withholding agents as custodians of public money.
What Happens If The Payer Does Not Deduct Withholding Tax
If a payer pays the contractor full money without deducting withholding tax. Government can hold the payer responsible for that amount and for the penalty as well.
This is because the law considers the payer as the withholding agent. So if you fail to deduct as required. You can still be forced to pay it later.
So withholding tax is a serious compliance responsibility that cannot be ignored casually.
The Beneficiary Must Collect Withholding Tax Credit Notes
The benefit for the payee is that they can use the withheld amount to reduce their final tax liability at the end of the year.
But they can only prove that it was deducted if they collect and keep withholding tax credit notes from the payer. This is why many service providers constantly chase clients for WHT credit receipts.
Records are important for tax reconciliation.
Summary In Simple Terms
Who pays withholding tax in Nigeria?
The person paying money for a qualifying service or contract is the one responsible for deducting withholding tax and remitting it to the tax authority. The person receiving the payment gets the benefit later as tax credit on their accountAn account is essentially a whose purpose is to track the financial activities of a specific asset/
Click to read more →.So withholding tax is not just a random deduction. It is a tool for advance tax collection. And the payer is the one government expects to handle the deduction and remittance process.