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FIRS resumes collection of income tax on bonds, others

The Federal Inland Revenue Service (FIRS), effective January 2, said it resumed collection of taxes on income derived by companies from bonds and short-term securities.

Recall that the Federal Government in 2012, exempted bonds and short-term government securities from income tax for 10 years.

A bond is a fixed-income instrument or loan made by an investor to a borrower, usually corporate or government.

With the expiration of the moratorium, FIRS said companies will now pay taxes on profits from such loans given to the government.

The new directive, contained in a circular, mandates businesses to pay income tax on the profit earned from bonds and short-term government securities, exempting income tax on bonds issued by the federal government.

The taxable transactions include treasury bills and promissory notes; bonds issued by state and local governments and their agencies; and bonds issued by corporate bodies and supra-national.

The circular reads: “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 of January, 2022, except for bonds issued by the federal government.”

FIRS agents were therefore directed to make deductions on interest and other payments made to any company on income from bonds and other 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 of January, 2022, except for bonds issued by the federal government.

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