WHT Credit Notes: Using Them Against Company Income Tax (CIT)

When Withholding Tax is deducted from your income, you receive a credit certificate that represents prepaid tax. This certificate isn't just paperwork—it's a valuable asset that reduces your Company Income Tax liability. This guide explains how to maximize the value of your WHT credits.

Understanding WHT as Prepaid Tax

The WHT Credit Concept

When a customer or client deducts WHT from your payment:

1. You receive less cash (net of WHT deduction)
2. You receive a credit certificate (proof of WHT paid)
3. At year-end, you offset the WHT against your CIT liability
4. You only pay the difference (CIT minus WHT credits)

WHT is not an additional tax—it's advance payment of your income tax.

How It Works in Practice

Example: Consulting Income

Step	Description	Amount
1	Invoice to client	₦10,000,000
2	WHT deducted by client (10%)	₦1,000,000
3	Cash received	₦9,000,000
4	WHT certificate received	₦1,000,000 credit

At year-end:

Step	Description	Amount
5	Your CIT liability (calculated)	₦3,000,000
6	Less: WHT credits	(₦1,000,000)
7	Net CIT payable	₦2,000,000

Types of Income with WHT Deduction

Common Sources of WHT Credits

Income Type	WHT Rate	Credit Available
Professional/consulting fees	10%/5%	Yes
Contract income	5%	Yes
Construction payments	5%	Yes
Rent received	10%	Yes
Dividends received	10%	Yes (conditions apply)
Interest received	10%	Yes
Royalty income	10%	Yes
Commission income	10%/5%	Yes

Government Contracts

Government agencies may deduct full taxes at source:

• WHT at applicable rate
• May deduct additional amounts
• All become credits against CIT

Collecting and Managing WHT Certificates

Obtaining Certificates

For every WHT deduction, you should receive:

• Original certificate from the payer
• Details matching the transaction
• Payer's TIN and information

What to Do If Certificate Not Received

If your client deducts WHT but doesn't provide certificate:

1. Request formally - Written request to client
2. Set deadline - Give reasonable timeframe
3. Follow up - Persistent but professional
4. Document efforts - Keep records of requests
5. Escalate if needed - May need management intervention

Certificate Requirements

Valid certificates must include:

• Payer's name, address, and TIN
• Your name, address, and TIN
• Certificate number
• Payment description
• Gross amount
• WHT rate and amount
• Date of issue
• Authorized signature

Record Keeping

Maintain organized records:

• Store certificates securely
• Create certificate register
• Track by date, payer, amount
• Reconcile to income records
• Keep for at least 6 years

Claiming WHT Credits Against CIT

The Annual Process

At year-end when calculating CIT:

Step 1: Calculate taxable profit

• Revenue minus allowable expenses
• Apply tax rules and adjustments

Step 2: Calculate CIT liability

• Apply CIT rate to taxable profit
• Standard rate: 30%
• Small company rate: 0% (if qualifying)

Step 3: Summarize WHT credits

• Total all valid certificates
• Ensure all relate to current year income

Step 4: Offset credits

• Deduct WHT credits from CIT liability
• Balance is net CIT payable

Step 5: File return

• Attach schedule of WHT credits
• Support with copies of certificates

Example: Full Calculation

Item	Amount
Taxable profit	₦50,000,000
CIT @ 30%	₦15,000,000
Less: WHT credits
- Consulting fees (various clients)	(₦3,000,000)
- Rental income	(₦500,000)
- Contract payments	(₦1,500,000)
Total WHT credits	(₦5,000,000)
Net CIT payable	₦10,000,000

Special Situations

Excess WHT Credits

What if WHT exceeds your CIT liability?

Example:

Item	Amount
CIT liability	₦2,000,000
WHT credits	₦3,000,000
Excess credits	₦1,000,000

Options for excess credits:

1. Carry forward - Apply to next year's CIT
2. Request refund - Apply to NRS (process can be lengthy)

Most businesses carry forward due to refund processing times.

Dividends Received

WHT on dividends received has special treatment:

• WHT is deducted at 10%
• Dividend income may be partially exempt from CIT
• WHT credit may still be available for non-exempt portion
• Consult tax advisor for specific treatment

Non-Resident WHT (Received from Abroad)

If foreign clients deduct tax from your payments:

• Foreign tax may be creditable against Nigerian CIT
• Subject to tax treaty provisions
• Maximum credit usually limited to Nigerian tax on that income

Timing Issues

WHT relates to the year the income was earned:

• January 2025 certificate → 2025 CIT return
• Even if received in February 2025
• Match certificates to income periods

Reconciliation Requirements

Matching Credits to Income

NRS expects reconciliation:

• WHT credits should relate to reported income
• Large credits without corresponding income raise questions
• Be prepared to demonstrate the connection

Reconciliation Schedule

Prepare a schedule showing:

Payer	Certificate No	Date	Income Reported	WHT Credit
ABC Ltd	WHT/2025/001	Jan-25	₦500,000	₦50,000
XYZ Corp	WHT/2025/015	Mar-25	₦1,000,000	₦100,000
Gov't Agency	WHT/2025/022	Jun-25	₦2,000,000	₦100,000
Total	₦3,500,000	₦250,000

Common Reconciliation Issues

Issue 1: Certificate amount doesn't match income

• WHT should be calculable from income
• ₦100,000 WHT at 10% means ₦1,000,000 income

Issue 2: Certificate date vs income date

• Certificate date may differ from invoice date
• Income timing based on accrual rules
• Document and explain differences

Issue 3: Missing certificates

• Income reported but no certificate
• Estimate credit if income is certain
• Document efforts to obtain certificate

Audit Considerations

What NRS Looks For

During audits, NRS (Formerly FIRS) verifies:

• Certificates are authentic
• Amounts match reported credits
• Income corresponding to WHT is reported
• Certificates are from the correct period
• Duplicate claims haven't been made

Audit-Ready Documentation

Maintain files containing:

• Original certificates
• Supporting invoices
• Payment receipts (showing net amount)
• Reconciliation schedules
• Any correspondence about certificates

Common Audit Adjustments

Issue	NRS Action
Invalid certificate	Disallow credit
Certificate for different entity	Disallow credit
Duplicate claim	Disallow, potential penalty
No supporting income	Query and investigate

Industry Considerations

Professional Services Firms

High WHT credit exposure:

• Most income subject to WHT
• Significant credits accumulated
• May have excess credits regularly

Best Practice: Active certificate collection from all clients.

Construction Companies

Construction contracts attract 5% WHT:

• Lower rate, but high contract values
• Substantial credits
• Often from government contracts

Best Practice: Track per project and reconcile to revenue.

Real Estate (Rental Income)

Rental income subject to 10% WHT:

• Tenants (especially companies) deduct WHT
• Monthly deductions accumulate

Best Practice: Monthly collection and tracking.

How Finora Manages WHT Credits

Credit Certificate Tracking

Finora makes WHT credit management automatic:

Recording Certificates:

• Enter certificate details
• Link to income transactions
• Attach scanned copies

Certificate Register:

• Complete listing of all certificates
• Searchable by payer, date, amount
• Status tracking (received, pending, matched)

Reconciliation Support

Automatic Matching:

• Link certificates to invoices
• Flag unmatched income (missing certificates)
• Flag unmatched certificates (income not recorded)

Reconciliation Report:

• Compare WHT credits to income
• Identify discrepancies
• Ready for audit

CIT Planning

Real-Time Tracking:

• Running total of WHT credits
• Projected CIT liability
• Net CIT estimate

Year-End Preparation:

• Summary of all credits for CIT return
• Supporting schedules
• Certificate inventory

Practical Tips

1. Collect Certificates Promptly

Don't wait until year-end:

• Request certificates with each payment
• Follow up on missing certificates
• Easier when transaction is fresh

2. Create a Certificate Log

Track all certificates:

• Date received
• Payer
• Amount
• Certificate number
• Status (filed, matched, etc.)

3. Reconcile Quarterly

Don't leave reconciliation to year-end:

• Quarterly review of credits vs income
• Identify issues early
• Follow up on gaps

4. Maintain Relationships

Good relationships help:

• Finance contacts at key clients
• Professional follow-up on certificates
• Mutual understanding of requirements

5. Use Technology

Manual tracking is error-prone:

• Use accounting software
• Automate where possible
• Reduce administrative burden

Frequently Asked Questions

What if my client won't provide a certificate?

Persist professionally. The certificate is your right—WHT was deducted from your income. Escalate if necessary. As a last resort, estimate the credit and document your efforts.

Can I claim credits without the physical certificate?

Technically, NRS requires certificates. However, if you have other evidence (invoices showing deduction, bank statements showing net payment), document thoroughly and be prepared to explain.

What if the certificate has errors?

Request a corrected certificate from the payer. If unable to obtain, document the error and the correct figures with supporting evidence.

How long are WHT credits valid?

Credits should be used in the year they relate to. Excess credits can typically be carried forward. Check current rules for time limits on carryforwards.

Can I sell or transfer WHT credits?

No. WHT credits are specific to the taxpayer who earned the income. They cannot be transferred to another entity.

Conclusion

WHT credit certificates are valuable assets—they directly reduce your CIT liability. Managing them well requires:

1. Active collection from all clients who deduct WHT
2. Careful record keeping of all certificates
3. Regular reconciliation to income records
4. Proper claiming in CIT returns
5. Audit-ready documentation

Finora automates WHT credit tracking, reconciliation, and reporting—ensuring you capture every credit you're entitled to and can demonstrate them to NRS.

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