TAX CONSIDERATIONS IN LEASING

Leasing is subject to:

  • Value Added Tax (VAT)
  • Withholding Tax and
  • Capital Gain Tax, CITA.

Finance Lease

  • VAT is not applicable, that is you don’t have to charge VAT on your finance leases
  • The interest portion of the rental is taxable income
  • Capital portion is a repayment and no tax implication
  • Withholding tax is on the interest portion of rental
  • Lessee has a duty to withhold tax at 10% of interest portion

Operating Lease :

  • The total lease rental received is taxable
  • Lessor is entitled to claim capital allowance
  • WHT 10% of the total rentals
  • Rental is liable to 5% VAT
  • Lessee shall withhold 10% of the rental and remit to Federal Inland Revenue Service (FIRS).