The FIRS has issued a Public Notice on the deduction of withholding tax and VAT on compensation paid to agents, dealers, distributors and retailers by principal companies.

The Notice requires such principal companies, particularly those in the Fast Moving Consumer Goods (FMCG) that WHT and VAT are due on compensation, commission rebates and other means of incentives or rewards whether paid by cash, credit note, or goods-in-transit must be subjected to WHT and VAT at the appropriate rates and remit to the FIRS not later than the 21st of every month.

This Notice will have implications on the tax treatment of trade incentive plans to your distributors and agents. Such plans usually include buy-one-get-one free (BOGOF), two-for-the-price-of-one, rebates, discounts, and commissions.

Given the lack of details and clarity regarding the Notice, we recommend that you review your specific circumstances within the context of existing tax legislation before implementation. You should consult where necessary.

See a copy of the Notice below:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.