Withholding Tax Rates in Nigeria: Complete 2025 Guide

Withholding Tax (WHT) is one of Nigeria's primary mechanisms for collecting income tax at source. As a business owner, you're required to deduct WHT from certain payments and remit it to the Nigeria Revenue Service (NRS), formerly known as FIRS. This guide covers everything you need to know about WHT rates in Nigeria.

What is Withholding Tax?

Withholding Tax is a tax deducted at source from payments made to suppliers, contractors, professionals, and other recipients. Instead of the recipient paying tax later, you deduct it upfront and remit directly to NRS (Formerly FIRS).

The recipient receives a WHT credit note, which they use to offset their income tax liability at year-end.

Who Must Deduct WHT?

You must deduct WHT if you are:

• A company registered in Nigeria
• A government agency
• An individual in business making qualifying payments
• Operating as an agent or contractor making qualifying payments

Note: Individuals making purely personal payments typically don't deduct WHT.

Current WHT Rates in Nigeria

Standard Rates by Payment Type

Payment Type	Corporate Rate	Individual Rate
Dividends	10%	10%
Interest	10%	10%
Rent	10%	10%
Royalties	10%	10%
Commission	10%	5%
Consultancy/Professional fees	10%	5%
Technical fees	10%	5%
Management fees	10%	5%
Directors' fees	10%	10%
Building/Construction	5%	5%
Contracts (supply of goods)	5%	5%
Contracts (supply of services)	10%	5%

Key Distinctions

Corporate vs Individual Rates

The rate often depends on whether the recipient is a company or an individual:

• Company: Higher rates (typically 10%)
• Individual: Lower rates (typically 5%)

Goods vs Services

For contracts:

• Supply of goods only: 5%
• Supply of services: 10% (corporate) / 5% (individual)
• Mixed (goods + services): Apply the higher rate or apportion if clearly separated

Detailed Rate Explanations

1. Dividends (10%)

All dividend payments attract 10% WHT:

Scenario	WHT Rate	Calculation
Dividend to company	10%	₦1,000,000 → ₦100,000 WHT
Dividend to individual	10%	₦500,000 → ₦50,000 WHT
Dividend to foreign company	10%	Subject to tax treaty rates

Example:

• Company declares ₦10,000,000 dividend to shareholders
• WHT deducted: ₦1,000,000
• Net dividend paid: ₦9,000,000
• WHT remitted to NRS: ₦1,000,000

2. Interest (10%)

Interest payments on loans and deposits attract WHT:

Interest Type	WHT Rate
Bank interest	10% (bank remits)
Intercompany loans	10%
Bond interest	10%
Individual savings	10%

Exemptions:

• Interest on government bonds (qualifying)
• Interest on foreign loans in certain sectors

3. Rent (10%)

Rent payments for property attract WHT:

Property Type	WHT Rate
Office rent	10%
Warehouse rent	10%
Equipment rental	10%
Vehicle hire	10%

Example:

• Monthly rent: ₦500,000
• WHT deducted: ₦50,000
• Net payment to landlord: ₦450,000

4. Professional and Consultancy Fees (5-10%)

Recipient Type	WHT Rate
Company (consulting firm)	10%
Individual consultant	5%
Law firm (company)	10%
Individual lawyer	5%
Accounting firm	10%
Individual accountant	5%

5. Construction and Building (5%)

Construction contracts attract 5% regardless of recipient:

Work Type	WHT Rate
Building construction	5%
Road construction	5%
Renovation work	5%
Civil engineering	5%

6. Supply Contracts (5%)

Supply of goods (without services) attracts 5%:

Supply Type	WHT Rate
Office supplies	5%
Raw materials	5%
Equipment	5%
Inventory for resale	5%

Note: If the contract includes installation or other services, the rate may increase.

Calculating WHT

Basic Calculation

WHT is calculated on the gross amount before VAT:

WHT Amount = Payment Amount × WHT Rate

Example with VAT

Component	Amount
Consulting fee	₦1,000,000
VAT (7.5%)	₦75,000
Invoice total	₦1,075,000
WHT (10% of ₦1,000,000)	₦100,000
Net payment to supplier	₦975,000

Key Point: WHT is calculated on the net amount (₦1,000,000), not the VAT-inclusive amount.

Example: Construction Contract

Component	Amount
Contract value	₦5,000,000
VAT (7.5%)	₦375,000
Invoice total	₦5,375,000
WHT (5% of ₦5,000,000)	₦250,000
Net payment to contractor	₦5,125,000

WHT on Non-Residents

Higher Rates for Foreign Recipients

Payments to non-residents may attract higher WHT rates:

Payment Type	Resident Rate	Non-Resident Rate
Dividends	10%	10% (treaty may reduce)
Interest	10%	10% (treaty may reduce)
Royalties	10%	10% (treaty may reduce)
Technical fees	10%	10%
Management fees	10%	10%

Tax Treaty Benefits

Nigeria has tax treaties with several countries that may reduce WHT rates:

• Belgium, Canada, China, France, Netherlands, Pakistan, Philippines, Romania, South Africa, UK, etc.

Treaty rates typically reduce WHT to 7.5% or lower for qualifying payments.

Claiming Treaty Benefits

Recipients must provide:

• Certificate of residence from their home country
• Declaration of beneficial ownership
• Other treaty-specific documentation

Payment Thresholds

Minimum Amounts

For administrative convenience, WHT may not apply to very small payments. However, there's no officially published de minimis threshold, so best practice is to deduct WHT on all qualifying payments.

Government Contracts

Government agencies deduct WHT on all payments regardless of amount.

Common WHT Scenarios

Scenario 1: Paying Your Accountant

Details	Amount
Accounting firm's invoice	₦200,000
VAT	₦15,000
Total invoice	₦215,000
WHT (10% of ₦200,000)	₦20,000
Net payment	₦195,000

You pay ₦195,000 to the accountant and remit ₦20,000 to NRS.

Scenario 2: Office Rent

Details	Amount
Monthly rent	₦1,000,000
VAT	₦75,000
Total invoice	₦1,075,000
WHT (10% of ₦1,000,000)	₦100,000
Net payment	₦975,000

Scenario 3: Buying Office Supplies

Details	Amount
Supplier invoice	₦500,000
VAT	₦37,500
Total invoice	₦537,500
WHT (5% of ₦500,000)	₦25,000
Net payment	₦512,500

Scenario 4: Hiring an Individual Consultant

Details	Amount
Consulting fee	₦300,000
VAT (if registered)	₦22,500
Total	₦322,500
WHT (5% of ₦300,000)	₦15,000
Net payment	₦307,500

WHT vs Income Tax

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

Aspect	WHT	Income Tax
When paid	At time of transaction	Year-end
Who pays	Payer deducts	Recipient pays
Treatment	Credit against final tax	Final liability
Rate	Fixed rates	Progressive/corporate rates

How Recipients Use WHT Credits

1. Receive WHT credit note from payer
2. Record WHT as prepaid tax
3. At year-end, offset against income tax liability
4. If WHT exceeds liability, claim refund or carry forward

Common Errors to Avoid

Error 1: Calculating WHT on VAT-Inclusive Amount

Wrong: WHT on ₦1,075,000 (invoice including VAT) Correct: WHT on ₦1,000,000 (net amount before VAT)

Error 2: Using Wrong Rate

Wrong: 5% for consulting services to a company Correct: 10% for consulting services to a company

Error 3: Not Deducting from Related Parties

Wrong: Skipping WHT on payments to subsidiary companies Correct: WHT applies to all qualifying payments, including intercompany

Error 4: Forgetting to Issue Credit Notes

Wrong: Deducting WHT but not providing documentation Correct: Issue WHT credit note to recipient for every deduction

How Finora Manages WHT Rates

Finora automates WHT compliance:

Automatic Rate Selection

• Set up suppliers with their WHT category
• System applies correct rate automatically
• Handles corporate vs individual rates

Accurate Calculations

• Calculates WHT on net amount
• Excludes VAT from calculation base
• Handles mixed contracts appropriately

Credit Note Generation

• Auto-generates WHT credit notes
• Tracks all deductions by recipient
• Provides year-end summaries

Compliance Reporting

• Monthly WHT returns prepared automatically
• Remittance tracking
• Recipient-wise analysis

Frequently Asked Questions

What if my supplier doesn't want me to deduct WHT?

WHT deduction is your legal obligation, not the supplier's choice. You must deduct and remit regardless of supplier preferences.

Do I deduct WHT on reimbursements?

If the reimbursement represents a service or supply that would normally attract WHT, yes. Pure expense reimbursements may not attract WHT.

What if I pay late?

Late remittance attracts penalties. File and pay by the 21st of the following month.

Can suppliers increase prices to cover WHT?

Yes, suppliers may adjust their pricing. However, WHT is still calculated on the agreed price. The gross-up reflects the supplier's commercial decision.

Do I deduct WHT from salaries?

No. PAYE (Pay-As-You-Earn) applies to salaries, not WHT. WHT is for payments to suppliers and contractors.

Conclusion

Understanding WHT rates in Nigeria is essential for every business. The rates vary by payment type and recipient status, but the core principle remains: deduct at source, remit to NRS, and issue credit notes.

Getting WHT right means:

• Using the correct rate for each payment type
• Calculating on the pre-VAT amount
• Remitting on time (by the 21st)
• Issuing proper credit notes

Finora simplifies this by automating rate selection, calculations, and documentation—ensuring you're always compliant with Nigerian WHT requirements.

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