Withholding Tax

What is Withholding Tax?

Withholding tax is an amount that an employer or payer is required to deduct from a payment and pay directly to the government. This is most commonly seen in payroll, where income tax is withheld from an employee’s wages.

Why It Matters

• It ensures a steady flow of revenue for the government throughout the year rather than a single annual payment.

• For employees, it helps them meet their tax obligations gradually, reducing the risk of a large tax bill at the end of the year.

• It is also applied to certain types of investment income, such as dividends and interest, especially when paid to non residents.