In December 2021, the Tax Appeal Tribunal (TAT) issued a ruling to the effect that a principal is responsible for accounting for WHT in respect of commissions earned by its agent, notwithstanding that the agent deducts the commission upfront. The ruling suggests that agents should deduct their commissions net of the applicable WHT.
The judgment raises interesting questions especially relating to other trust, fiduciary and/or agency arrangements (such as banking and insurance brokerage). For example, for certain banking transactions, banks hold deposits on behalf of their customers and deduct bank charges or interest, at source. Would the bank customers be responsible for deducting and accounting for WHT (considering that there is no opportunity to do so)? There are also concerns regarding whether the ruling aligns with the literal reading of the law.
Betting companies (and other companies with similar arrangements with agents) in Nigeria are advised to review their operating structures and contractual agreements with their agents in this regard.
Please see PwC's Tax Alert on this judgment, below:
Download TAT rules Withholding Tax is applicable on commission deducted upfront by betting agents