Non-Resident WHT in Nigeria: International Transaction Guide

When Nigerian businesses make payments to non-residents (foreign companies or individuals), special Withholding Tax rules apply. These payments are subject to Nigerian WHT, potentially at higher rates, and may be affected by tax treaties. This guide explains how to handle WHT on international transactions correctly.

Understanding Non-Resident WHT

What is Non-Resident WHT?

Non-resident WHT is tax deducted from payments made to persons or companies that:

• Are not resident in Nigeria
• Do not have a permanent establishment in Nigeria
• Receive income sourced from Nigeria

Why Non-Resident WHT Exists

• Ensures Nigeria collects tax on Nigerian-sourced income
• Non-residents may not file Nigerian tax returns
• WHT may be the final tax on such income
• Prevents base erosion and profit shifting

Who is a Non-Resident?

Companies:

• Incorporated outside Nigeria
• Management and control outside Nigeria
• No Nigerian permanent establishment

Individuals:

• Not physically present in Nigeria for 183+ days
• Not ordinarily resident in Nigeria
• Domiciled outside Nigeria

Non-Resident WHT Rates

Standard Rates

Payment Type	Rate
Dividends	10%
Interest	10%
Royalties	10%
Rent	10%
Technical/Management fees	10%
Commissions	10%
Professional fees	10%
Directors' fees	10%
Construction contracts	5%

Comparison: Resident vs Non-Resident

Payment Type	Resident Rate	Non-Resident Rate
Professional fees (company)	10%	10%
Professional fees (individual)	5%	10%
Dividends	10%	10%
Technical fees	10%	10%

Note: Some rates are the same, but treaty rates may provide reductions for non-residents.

Tax Treaty Benefits

Countries with Nigeria Tax Treaties

Nigeria has tax treaties with:

• Belgium
• Canada
• China
• Czech Republic
• France
• Netherlands
• Pakistan
• Philippines
• Romania
• Slovakia
• South Africa
• United Kingdom

Treaty-Reduced Rates

Treaties may reduce WHT rates:

Country	Dividends	Interest	Royalties
UK	7.5%	7.5%	7.5%
France	7.5%	7.5%	7.5%
Canada	7.5%	7.5%	7.5%
South Africa	7.5%	7.5%	7.5%
China	7.5%	7.5%	7.5%
Belgium	7.5%	7.5%	7.5%

Actual treaty rates may vary—always verify current treaty provisions.

Claiming Treaty Benefits

To apply reduced treaty rates, the non-resident must:

1. Provide Certificate of Tax Residence

• Issued by their home country tax authority
• Confirms they are tax resident there
• Valid for the relevant period

1. Complete Beneficial Ownership Declaration

• Confirms they are the beneficial owner
• Not acting as agent or conduit

1. Submit Documentation to Payer

• Before or at time of payment
• Payer keeps for records

Without these documents, apply the full 10% rate.

Payment Types Explained

1. Dividends to Non-Residents

Dividend payments to foreign shareholders:

Scenario	Rate
No treaty	10%
Treaty country (typical)	7.5%
Portfolio investment exemption	May vary

Example:

• Dividend to UK parent company: ₦100,000,000
• Treaty rate: 7.5%
• WHT: ₦7,500,000
• Net dividend: ₦92,500,000

2. Interest to Non-Residents

Interest on loans from foreign lenders:

Loan Type	WHT Treatment
Intercompany loans	10% (treaty may reduce)
Foreign bank loans	10% (exemptions may apply)
Bond interest to non-residents	10%

Exemptions:

• Interest on foreign loans for certain priority sectors may be exempt
• Check specific exemption criteria

3. Royalties to Non-Residents

Payments for intellectual property use:

Royalty Type	Rate
Patent/trademark royalties	10%
Copyright royalties	10%
Know-how fees	10%
Software licenses	10%

4. Technical and Management Fees

Fees for technical services or management:

Service Type	Rate
Technical services	10%
Management fees	10%
Parent company charges	10%
Headquarters expenses	10%

These are common in multinational groups—significant WHT exposure.

5. Professional Services

Fees to foreign professionals:

Service	Rate
Foreign consultants	10%
Legal services from abroad	10%
Accounting/audit services	10%
Engineering services	10%

Step-by-Step: Non-Resident WHT Compliance

Step 1: Identify Non-Resident Status

Confirm the recipient is non-resident:

• Review incorporation documents
• Confirm no Nigerian permanent establishment
• Document the analysis

Step 2: Determine Payment Type

Classify the payment correctly:

• Professional fees vs technical fees
• Royalties vs service fees
• Interest vs other charges

Step 3: Check for Treaty

Identify if a treaty applies:

• What country is the recipient resident in?
• Does Nigeria have a treaty with that country?
• What rate does the treaty specify?

Step 4: Obtain Treaty Documentation

If claiming treaty rate:

• Certificate of tax residence
• Beneficial ownership declaration
• Keep copies for your records

Step 5: Calculate WHT

Apply correct rate to gross payment:

• Full rate if no treaty/no documentation
• Treaty rate if properly documented

Step 6: Make Payment

Deduct WHT and pay net amount:

• Convert to payment currency if needed
• Issue WHT credit certificate

Step 7: Remit to NRS

Include in monthly WHT return:

• File by 21st of following month
• Include non-resident payments in schedule
• Remit WHT to NRS

Step 8: Issue Certificate

Provide WHT certificate to non-resident:

• They may need it for foreign tax credits
• Include all required details

Practical Examples

Example 1: Management Fee to UK Parent

Details	Amount
Quarterly management fee	$100,000
Exchange rate	₦1,500/$1
Naira equivalent	₦150,000,000
Treaty rate	7.5%
WHT	₦11,250,000
Net payment (Naira)	₦138,750,000
Net payment (USD)	$92,500

Requirements:

• UK tax residence certificate
• Beneficial ownership declaration

Example 2: Software License from US Company

Details	Amount
Annual license fee	$50,000
Exchange rate	₦1,500/$1
Naira equivalent	₦75,000,000
WHT rate (no treaty)	10%
WHT	₦7,500,000
Net payment	₦67,500,000

Note: No Nigeria-US treaty, so full 10% applies.

Example 3: Dividend to South African Shareholder

Details	Amount
Dividend declared	₦200,000,000
Treaty rate	7.5%
WHT	₦15,000,000
Net dividend	₦185,000,000

With proper documentation from South Africa.

Documentation Requirements

For the Payer (You)

Maintain records of:

• Non-resident's details (name, address, jurisdiction)
• Contract/agreement
• Invoices
• Tax residence certificate (if treaty claimed)
• Beneficial ownership declaration
• Payment evidence
• WHT calculation
• Certificate issued
• WHT return submission

For Treaty Claims

Essential documents:

1. Certificate of Tax Residence

• From non-resident's tax authority
• Current (usually valid for 1 year)
• Covers the payment period

1. Beneficial Ownership Declaration

• Statement that recipient is beneficial owner
• Not a conduit/agent arrangement
• Signed by authorized person

1. Company Documentation

• Certificate of incorporation
• Evidence of non-resident status

Record Retention

Keep all documentation for at least 6 years for NRS (Formerly FIRS) audit purposes.

Common Challenges

Challenge 1: No Treaty

Issue: Many important trading partners have no treaty with Nigeria (e.g., USA, Germany, India).

Impact: Full 10% WHT with no reduction.

Approach:

• Factor WHT into commercial negotiations
• Consider gross-up provisions in contracts
• Non-resident may claim credit in their country

Challenge 2: Obtaining Documentation

Issue: Foreign recipients may not understand Nigerian requirements.

Impact: Cannot apply treaty rate without documentation.

Approach:

• Explain requirements clearly upfront
• Provide template declarations
• Build into payment process timeline

Challenge 3: Currency and Exchange Rates

Issue: Payments in foreign currency, WHT in Naira.

Impact: Exchange rate fluctuations affect calculations.

Approach:

• Use CBN rate on payment date
• Document rate used
• Be consistent

Challenge 4: Permanent Establishment Questions

Issue: Non-resident may have activities in Nigeria that could create PE.

Impact: If PE exists, different (possibly more favorable) rules may apply.

Approach:

• Assess PE status carefully
• Consult tax advisors for complex cases

Interaction with Other Taxes

WHT and VAT

Non-resident WHT often coincides with:

• Reverse charge VAT on imported services
• Both may apply to the same payment

Example: Foreign Consulting Fee

• Consulting fee: $10,000 (₦15,000,000)
• WHT (10%): ₦1,500,000
• Reverse charge VAT (7.5%): ₦1,125,000
• Net payment to consultant: ₦13,500,000

Both WHT and reverse charge VAT apply.

WHT and Transfer Pricing

Related party payments (e.g., management fees to parent company):

• Subject to WHT
• Must also be arm's length (transfer pricing)
• WHT doesn't validate the price—both must comply

How Finora Manages Non-Resident WHT

Finora simplifies international payment compliance:

Non-Resident Supplier Setup

• Flag suppliers as non-resident
• Record jurisdiction
• Store treaty status

Automatic Rate Application

• Apply correct WHT rate
• Factor in treaty if documented
• Alert when documentation needed

Currency Handling

• Record foreign currency amounts
• Track exchange rates
• Calculate WHT in Naira

Documentation Tracking

• Attach tax residence certificates
• Track expiration dates
• Alert when renewal needed

Reporting

• Separate reporting for non-resident payments
• Support for monthly returns
• Year-end analysis

Frequently Asked Questions

What if the non-resident refuses WHT deduction?

WHT is your legal obligation. Deduct regardless of recipient objections. Provide explanation and credit certificate.

Can non-residents claim Nigerian WHT as foreign tax credit?

Yes, in most countries. The credit certificate you issue supports their claim. This is why proper documentation matters.

What about payments through foreign branches?

If the branch is in a treaty country and is the beneficial owner, treaty benefits may apply. Analyze carefully.

Do I need NRS approval to apply treaty rates?

No advance approval required. Apply correct rate with proper documentation. Keep records for audit.

What about digital services from non-residents?

Subject to WHT (and potentially reverse charge VAT). The digital nature doesn't change WHT obligations.

Conclusion

Non-resident WHT is a critical compliance area for Nigerian businesses with international payments. The key points are:

1. 10% WHT applies to most payments to non-residents
2. Tax treaties may reduce rates to 7.5% or lower
3. Documentation is essential for treaty benefits
4. File and remit monthly like domestic WHT
5. Issue certificates to non-residents for their records

Finora helps you manage the complexity of non-resident WHT with automatic rate application, documentation tracking, and compliant reporting.

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