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).