Calculating withholding tax is a relatively straightforward process once you understand the applicable rates and the nature of the income. The calculation involves multiplying the income amount by the applicable tax rate to determine the tax to be deducted.

For example, let’s say you are a company making a payment of ₦100,000 to a contractor for services rendered. The applicable withholding tax rate for the type of service is 5%. To calculate the withholding tax, you would multiply ₦100,000 by 5% (0.05), which gives you ₦5,000. Therefore, you would deduct ₦5,000 from the payment and remit it to the tax authorities on behalf of the contractor.

Once the withholding tax has been calculated, it is important to remit it to the tax authorities within the specified time frame. The exact remittance process may vary depending on the tax authority and the mode of payment. In most cases, it involves filling out a withholding tax remittance form and making the payment through a designated bank or online platform.

It is crucial to keep records of all withholding tax deductions and remittances for future reference and potential audits. These records should include details such as the amount of income, the applicable tax rate, the amount of tax deducted, and the date of remittance. Proper record-keeping is essential for compliance and may be required in the event of a tax audit or investigation.

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