Withholding Tax in Nigeria: Rates, Who Deducts It and How to Remit (2026)

When a Nigerian company pays your invoice and the money that arrives is 5% or 10% short, the difference is withholding tax. It has not been lost. The client has deducted part of your income tax at source and will remit it to the tax authority in your name. Whether it becomes a cost or a credit depends on whether you track it.

What withholding tax is

WHT is a collection mechanism, not a separate tax. The payer deducts a percentage of qualifying payments, remits it to the NRS (for companies) or the State Internal Revenue Service (for individuals), and gives the payee evidence of the deduction. The payee then sets the amount against their own income tax bill. If more was withheld than they owe, they can claim a refund or carry the credit forward.

The rules were rewritten in the Deduction of Tax at Source (Withholding) Regulations 2024, effective from 2025, and carried into the framework of the Nigeria Tax Act 2025. The rewrite lowered several rates, exempted small businesses, and removed WHT from many sales of goods by the manufacturer.

Current rates

Payments to non-residents are generally at the company rate but may be reduced by a double-tax treaty. Confirm the current schedule against the Regulations before you set a rate in your payroll or payables system; the rates above are the headline figures and the schedule carries detail.

What is not subject to WHT

• Goods sold by the manufacturer, producer or importer in the ordinary course of business.
• Payments to a small company (turnover ₦25 million or less) where the transaction is ₦2 million or less in the month.
• Across-the-counter retail sales and payments for telephone, internet and airline tickets.
• Interest and fees paid to Nigerian banks, and insurance premiums.
• Salaries and wages — those are under PAYE, not WHT. See the PAYE calculator.

If you are the payer

1. Verify the payee’s TIN before the first payment. WHT remitted against a wrong TIN is a dispute waiting to happen.
2. Apply the rate to the amount excluding VAT. On a ₦1,000,000 consultancy invoice carrying ₦75,000 VAT, WHT at 5% is ₦50,000, and you pay the consultant ₦1,025,000.
3. Remit to the right authority: NRS for company payees, the payee’s state IRS for individuals and business names.
4. Remit by the 21st of the following month for the NRS; state deadlines are similar, generally within 30 days.
5. Issue the payee a credit note or send them the remittance receipt. Without it they cannot claim.

Failing to deduct does not shift the liability: the payer owes the tax plus a penalty and interest, and cannot recover it from the payee afterwards without a fight.

If you are the payee

1. Invoice the full amount. Do not reduce your price by the WHT; the client deducts it.
2. Record each short payment against the invoice as WHT suffered, not as a discount or a bad debt. This is where spreadsheets go wrong and credits vanish.
3. Chase the credit note. Clients forget. A monthly email asking for the previous month’s WHT receipts is normal practice.
4. Reconcile the credits showing on the tax authority’s portal against your records each quarter.
5. Claim the total on your income tax return. Credits older than the carry-forward window are lost.

A worked example

A design studio registered as a limited company invoices a client ₦2,000,000 plus 7.5% VAT, total ₦2,150,000. The client deducts WHT at 5% of ₦2,000,000, which is ₦100,000, pays ₦2,050,000, remits the ₦100,000 to the NRS by the 21st of the next month and sends the studio the receipt. At year end the studio’s company income tax works out at ₦600,000; it pays ₦500,000 and the ₦100,000 credit covers the rest. Lose the receipt and the studio pays ₦600,000.

What changed for small businesses

The exemption for small companies is the practical headline. A company under the turnover threshold neither deducts WHT when it pays suppliers nor suffers it on small transactions, which removes a whole layer of monthly filing. Combined with the Nigeria Tax Act’s zero rate of company income tax for small companies, many businesses that spent 2024 chasing credit notes have nothing to claim in 2026. They do still need to keep the records that prove they qualify.

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This is general information, not tax advice. Portals, forms and thresholds change as the Nigeria Revenue Service and the Joint Revenue Board settle into the new law. Confirm your position with a licensed tax adviser before you rely on it.