WHT on Rent, Dividends, and Professional Fees in Nigeria

Three of the most common WHT scenarios Nigerian businesses encounter are rent payments, dividend distributions, and professional fees. Each has specific rules, rates, and compliance requirements. This guide provides detailed coverage of all three.

Part 1: WHT on Rent Payments

What Rent Payments Attract WHT

Withholding Tax applies to rent paid for:

Property Type	WHT Applies?
Office space	Yes
Warehouse/storage	Yes
Retail premises	Yes
Factory/industrial	Yes
Equipment rental	Yes
Vehicle hire	Yes
Plant and machinery	Yes
Residential (by companies)	Yes

WHT Rate on Rent

Standard rate: 10%

This applies regardless of whether the landlord is:

• A company
• An individual
• Resident or non-resident

Calculating WHT on Rent

WHT is calculated on the gross rent amount (excluding VAT):

Example: Annual Office Rent

Component	Amount
Annual rent	₦12,000,000
VAT (7.5%)	₦900,000
Total invoice	₦12,900,000
WHT (10% of ₦12,000,000)	₦1,200,000
Net payment	₦11,700,000

Monthly vs Annual Rent

Monthly Payment:

Component	Amount
Monthly rent	₦1,000,000
VAT	₦75,000
WHT (10%)	₦100,000
Net payment	₦975,000

Deduct WHT each month when you pay.

Annual Payment in Advance:

Component	Amount
Annual rent (paid upfront)	₦12,000,000
VAT	₦900,000
WHT (10%)	₦1,200,000
Net payment	₦11,700,000

Deduct full WHT when you make the annual payment.

Common Rent WHT Scenarios

Scenario 1: Rent to Individual Landlord

You rent an office from Mr. Ade:

• Monthly rent: ₦500,000
• VAT: Likely none if individual is not VAT registered
• WHT: 10% × ₦500,000 = ₦50,000
• Net payment: ₦450,000

Still deduct WHT even though landlord is an individual.

Scenario 2: Sublease Arrangement

You sublease part of your office:

• The subtenant should deduct WHT from rent paid to you
• You deduct WHT from rent paid to your landlord
• Both streams have WHT obligations

Scenario 3: Rent-Free Period

If you receive a rent-free period:

• No payment = No WHT to deduct
• When normal payments begin, deduct WHT as usual

Scenario 4: Service Charges

Service charges (maintenance, security, etc.) bundled with rent:

• If part of lease agreement, may attract WHT
• If separate service contract, evaluate independently

Landlord Response to WHT

Landlords may:

• Accept net payment plus credit certificate
• Gross up rent to cover WHT impact
• Include WHT clause in lease agreement

Part 2: WHT on Dividends

When WHT Applies to Dividends

WHT must be deducted when distributing dividends to shareholders:

Shareholder Type	WHT Rate
Nigerian company	10%
Nigerian individual	10%
Foreign company	10% (treaty may reduce)
Foreign individual	10% (treaty may reduce)

Calculating WHT on Dividends

Example: Dividend to Corporate Shareholder

Component	Amount
Dividend declared	₦5,000,000
WHT (10%)	₦500,000
Net dividend paid	₦4,500,000

Dividend WHT Process

Step 1: Board Declares Dividend

• Resolution specifies gross dividend amount
• Per-share amount determined

Step 2: Calculate WHT per Shareholder

• Total dividend × 10% = WHT
• Apply to each shareholder's portion

Step 3: Pay Net Dividend

• Deduct WHT from each shareholder's dividend
• Transfer net amount to shareholder

Step 4: Remit WHT

• Include in monthly WHT return
• Pay to NRS by 21st of following month

Step 5: Issue Credit Certificates

• Provide WHT certificate to each shareholder
• Certificate supports their tax credit claim

Dividend WHT Exemptions

Certain dividends may be exempt from WHT:

Scenario	WHT Status
Pioneer company dividends	May be exempt during pioneer period
Dividends from tax-exempt profits	May be exempt
Qualifying agricultural dividends	May have reduced rate
Treaty-reduced rates	Various treaties reduce from 10%

Dividend-in-Specie

If dividends are paid in kind (property, shares, etc.):

• Value the distribution at fair market value
• Calculate WHT on that value
• Shareholder must fund WHT payment (usually from other sources)

Interim vs Final Dividends

Dividend Type	WHT Treatment
Interim dividend	Deduct WHT at payment
Final dividend	Deduct WHT at payment
Stock dividend	Generally no WHT (no cash payment)

Part 3: WHT on Professional Fees

Professional Services Covered

Professional fees subject to WHT include:

Profession	Service Examples
Legal	Litigation, contracts, advisory
Accounting	Bookkeeping, financial statements
Audit	Statutory and internal audits
Tax	Tax planning, returns, advisory
Consulting	Strategy, operations, IT
Engineering	Design, supervision, technical
Architecture	Building design, planning
Medical consulting	Specialist consultations
Surveying	Land surveys, valuations

WHT Rates on Professional Fees

Recipient	WHT Rate
Professional firm (company)	10%
Individual professional	5%
Partnership	5% (treated as individuals)

Calculating WHT on Professional Fees

Example: Legal Fees to Law Firm

Component	Amount
Legal fees	₦2,000,000
VAT (7.5%)	₦150,000
Total invoice	₦2,150,000
WHT (10% of ₦2,000,000)	₦200,000
Net payment	₦1,950,000

Example: Consulting Fee to Individual

Component	Amount
Consulting fee	₦500,000
VAT (if registered)	₦37,500
Total invoice	₦537,500
WHT (5% of ₦500,000)	₦25,000
Net payment	₦512,500

Professional Fee Scenarios

Scenario 1: Retainer Arrangements

Monthly retainer to accounting firm:

• Monthly retainer: ₦300,000
• Deduct 10% WHT each month: ₦30,000
• Issue monthly credit certificates

Scenario 2: Success/Performance Fees

Fee based on transaction success:

• Apply WHT when fee becomes payable
• Rate based on recipient type (10% company, 5% individual)

Scenario 3: Reimbursable Expenses

Professional invoice includes expense reimbursements:

• Professional fee: ₦500,000 → WHT applies
• Travel reimbursement: ₦50,000 → Generally no WHT
• Clearly separate on invoice

Scenario 4: Foreign Professional Services

Engaging foreign professionals:

• 10% WHT standard rate
• Check tax treaty for reductions
• May also trigger reverse charge VAT

Comparative Summary

Payment Type	Company Rate	Individual Rate	Base for Calculation
Rent	10%	10%	Gross rent (ex-VAT)
Dividends	10%	10%	Gross dividend
Professional fees	10%	5%	Gross fee (ex-VAT)

Interaction with Other Taxes

WHT and VAT

Payment Type	WHT	VAT
Rent (commercial)	10% on net	7.5% separately
Dividends	10%	No VAT
Professional fees	10%/5% on net	7.5% separately

WHT is calculated on the pre-VAT amount, not the VAT-inclusive total.

WHT and Income Tax

WHT is a credit against the recipient's income tax:

• Company: Offsets Company Income Tax (CIT)
• Individual: Offsets Personal Income Tax (PIT)
• If WHT > Final tax: Refund may be available

Documentation Requirements

For Rent Payments

Keep records of:

• Lease agreement
• Rent invoices
• Payment evidence
• WHT certificates issued
• Landlord TIN

For Dividends

Keep records of:

• Board resolution declaring dividend
• Shareholder register
• Dividend calculations
• Payment evidence
• WHT certificates issued

For Professional Fees

Keep records of:

• Engagement letter/contract
• Professional invoices
• Payment evidence
• WHT certificates issued
• Professional's TIN

How Finora Handles These Payments

Rent Payments

Finora tracks your rent obligations:

• Set up recurring rent payments
• Auto-calculate WHT each period
• Generate certificates for landlord
• Track against lease terms

Dividend Distribution

Manage dividend payments efficiently:

• Upload shareholder details
• Calculate WHT per shareholder
• Generate individual certificates
• Prepare distribution schedules

Professional Fees

Process professional invoices correctly:

• Identify professional services
• Apply correct rate (company vs individual)
• Calculate WHT automatically
• Generate certificates immediately

Consolidated Reporting

• All WHT types in one dashboard
• Monthly return combines all categories
• Clear reporting by payment type

Frequently Asked Questions

Can landlords refuse to accept WHT deduction?

No. WHT deduction is your legal obligation. Landlords must accept net payment plus WHT certificate.

What if dividends are reinvested instead of paid?

Reinvested dividends may still be subject to WHT if they constitute a deemed distribution. Consult a tax advisor for specific scenarios.

Do I deduct WHT from my lawyer's fees every time?

Yes. Every payment to legal professionals for professional services attracts WHT.

What about success fees or contingency arrangements?

WHT applies when the fee becomes payable, regardless of the basis for calculating it.

Is there a minimum amount for professional fee WHT?

No official minimum. Best practice is to deduct on all amounts for compliance certainty.

Conclusion

Rent, dividends, and professional fees are among the most common WHT situations. Each follows clear rules:

• Rent: 10% on gross rent, regardless of recipient type
• Dividends: 10% on all dividend distributions
• Professional fees: 10% for companies, 5% for individuals

Proper handling requires correct rate application, accurate calculations, timely remittance, and proper documentation. Finora automates all of this, ensuring you handle these common WHT scenarios correctly every time.

---

Managing multiple WHT payment types?

Get started for free and let Finora automatically handle WHT on rent, dividends, and professional fees with correct rates and compliant certificates.

Try Finora Free →