Withholding Tax in Nigeria: Rates, Rules, and Remittance

What is Withholding Tax?

Withholding Tax (WHT) is a prepayment of income tax, deducted at source by the payer and remitted to tax authorities. It's not an additional tax - recipients can offset it against their final tax liability.

WHT Rates by Category

When to Deduct WHT

You must deduct WHT when making payments for:

• Contracts and supplies above ₦1 million
• Professional services
• Rent payments
• Interest payments
• Dividend distributions

How to Remit

Timeline

• Deduct at time of payment
• Remit within **21 days** of deduction
• Issue WHT credit note to recipient

Where to Remit

• **Companies**: To FIRS (Federal)
• **Individuals**: To State IRS

WHT Credit Notes

When you deduct WHT, you must issue a credit note showing:

• Payer details and TIN
• Recipient details and TIN
• Gross amount
• WHT rate and amount
• Date of deduction

The recipient uses this to offset their tax liability.

Common Mistakes to Avoid

1. Not deducting - Payers are liable for unremitted WHT

2. Wrong rate - Using company rate for individuals (or vice versa)

3. Late remittance - Attracts penalties and interest

4. No credit note - Recipients can't claim offset

Special Cases

Non-Residents

Higher rates apply for payments to non-residents:

• Generally 10% across all categories
• May be reduced by Double Tax Treaties

Exempt Payments

Some payments are exempt:

• Government agencies
• Charitable organizations (with exemption certificate)
• Diplomatic missions

Practical Example

Scenario: Your company pays a consultant ₦5,000,000

1. Calculate WHT: ₦5,000,000 × 10% = ₦500,000

2. Pay consultant: ₦4,500,000

3. Remit to FIRS: ₦500,000 within 21 days

4. Issue credit note for ₦500,000

The consultant can offset this ₦500,000 against their annual tax.

Conclusion

WHT is a critical part of Nigerian tax compliance. Get it wrong and you face penalties; get it right and your vendors appreciate the smooth process.

Use our WHT Calculator to compute correct deductions.