Federal Inland Revenue Service (FIRS) announced that income tax applies to income derived by companies from bonds and short-term securities effective from 2nd January 2022.
This was disclosed by Muhammad Nami, Executive Chairman, Federal Inland Revenue Service in a document titled, “Public Notice On Payment Of Income Tax On Profit From Bonds And Short-Term Government Securities.”
It would be recalled that in 2012, the federal government exempted bonds and short-term government securities from income tax for ten years which recently expired on January 1, 2022.
What the FIRS is saying about income tax
The circular reads “The Federal Government by an Order dated 2nd January 2012 exempted bonds and short-term Government Securities from income tax for 10 years. The exemption expired on 1st January 2022, except for Bonds Issued by Federal Government.”
The FIRS notified the public that the tax applied to short and long term securities. “The taxpaying public is hereby invited to note that income tax applies to income derived by companies from bonds and short-term securities effective from 2nd January 2022, except for Bonds Issued by Federal Government,” it said.
The FIRS stated that taxpayers are therefore expected to comply with the law by including such income in the self-assessment returns and tax computation of companies and paying appropriate taxes.
The circular added that “agents of collection of withholding taxes (WHT) are to note the above for deduction of WHT on interest and other payments made to any company on account of income from bonds and other securities.”
For clarity, such bonds and short-term securities on which tax is due effective from 2nd January 2022 include:
- (i) Short term Federal Government of Nigeria Securities, such as Treasury Bills and Promissory Notes;
- (ii) Bonds Issued by State and Local Governments and their Agencies;
- (iii) Bonds issued by corporate bodies including supra-nationals; and
- (iv) Interest earned by holders of the Bond and Securities mentioned in paragraph
- (i) to (iii) above.
