There is a need to draw attention to the fundamental difference between withholding tax (WHT) and Value Added Tax (VAT) so as to facilitate clear understanding of the mechanics of the tax concepts.
WHT is an advance payment of income tax and the purpose is to bring the prospective taxpayer into the tax-net, thereby widening the income tax base. In other words, the WHT system is aimed at tracking down taxpayers and the incomes which may otherwise not be reported by them.

When the income on which WHT is deducted at source is finally brought to the notice of the tax authority and the appropriate tax computed, due credit is given for the WHT deducted at source on the presentation of the original WHT receipts through the issuance of credit notes. The taxpayer will be required to pay only the balance due after matching the actual tax liability against the credit for the WHT suffered at source. WHT is therefore nothing more than a collection machinery to curb tax evasion. It is a part of the income tax – whether personal or corporate tax.

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