Withholding

What is Withholding?

Withholding or withholding tax refers to process of deducting taxation from an a payment to person, and paying this over to the government on their behalf. Governments use this method of withholding tax in order to minimize the risk of tax evasion and to reduce the costs of collection.

For example and employer normally deducts tax from an employees pay or a business will deduct tax from a dividend payment before paying the shareholder. The deduction is paid over to the government and treated as an on account payment by the person towards their final tax liability.

For further information see the Wikipedia withholding definition.

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