Withholding Tax (WHT)

Withholding Tax (WHT) is an advance tax deducted at source from payments for certain goods, services, and transactions. It is not a separate tax — it is a prepayment of the recipient's income tax liability (PIT or CIT). The payer deducts WHT and remits it to the relevant tax authority, then issues a WHT credit note to the recipient.

Applicable WHT rates in Nigeria: Individuals (non-corporate): • Dividends, interest, rent — 10% • Royalties — 10% • Commission, consultancy, management fees — 5% • Construction/building — 5% • Supply of goods — 5% • All other contracts/services — 5% Companies: • Dividends, interest, rent — 10% • Royalties — 10% • Commission, consultancy, management fees — 10% • Construction/building — 5% • Supply of goods — 5% • Technical/management services — 10% Non-residents: Rates may be modified by Double Taxation Agreements (DTAs).

When WHT is deducted from your payment, the payer should issue you a WHT credit note (typically Form WHT 1). This credit note evidences that tax has already been paid on your behalf. When you file your PIT or CIT annual return, you offset your WHT credits against your computed tax liability: Tax Payable = Computed Tax − WHT Credits If your WHT credits exceed your tax liability, the excess can be: • Carried forward to the next tax year • Applied for a refund (rare in practice) • Used to offset future tax liabilities

The obligation to deduct WHT falls on the payer, including: • Companies making payments to individuals or other companies for applicable services • Government agencies (MDAs) making payments to contractors and suppliers • Banks on interest payments (at 10%) Individuals (non-corporate) making private payments are generally not required to deduct WHT.

WHT must be remitted to the relevant tax authority within 21 days of the deduction. For FIRS-applicable taxes (companies, FCT), remittance is via TaxProMax. For state taxes, remittance is to the relevant SIRS. The payer must file annual WHT returns showing all deductions made during the year.