FIRS resumes collection of income tax on bonds and short-term securities

The Federal Inland Revenue Service (FIRS) says it will start collecting taxes on income derived by companies from bonds and short-term securities.

A bond is a fixed-income instrument (loan) made by an investor to a borrower (typically corporate or government).

In 2012, the federal government had exempted bonds and short-term government securities from income tax for 10 years.

With the expiration, FIRS said companies will now pay taxes on profits from loans given to their government from January 2, 2022.

The new directive, contained in a circular obtained by newsmen, FIRS 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.

It listed short term government securities to 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 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,” the circular reads.