WHT: final tax or credit?

Withholding tax is not a tax. It is a collection mechanism: the person paying you deducts a slice at source and sends it to the revenue in your name.

What happens next is the part that matters, and it goes one of two ways.

As a credit, the deduction is an advance payment of your own income tax. You compute your liability as normal, subtract what was withheld, and pay the difference. Withhold more than you owe and you are due a refund.

As a final tax, the deduction is the tax. That income has been taxed. You do not add it to your assessable income and you do not credit the deduction against anything, because there is nothing left to credit it against.

Same deduction, same paperwork, entirely different consequence.

The error that costs the most

Consultancy and professional fees paid to residents are a final tax.

This surprises people, and the mistake runs both ways:

• Freelancers and consultants who credit it treat the 5% as an advance, compute PIT on their full income, subtract the 5% and pay the balance. They have paid tax twice on that income.
• Companies that credit it do the same in their CIT computation, understate their liability, and pick up a penalty and interest when it is corrected.

If you invoice a company for consultancy and they deduct 5%, that income is done. The WHT rate finder states which treatment applies for every combination in the schedule.

The rule of thumb, and where it breaks

Broadly:

• Passive income — dividends, interest, rent, royalties — is final for residents.
• Payments to non-residents are almost always final. A non-resident has no Nigerian return to credit it against.
• Trading and supply income — goods, construction, transport — is a credit.
• Services to residents — consultancy, professional, technical, management, commission, brokerage — is final, despite feeling like trading income.

That last one breaks the rule of thumb, and is why the rule of thumb is not good enough. Check the WHT matrix rather than reasoning from the category.

The rates you will actually meet

| Payment | Resident | Non-resident | | --- | --- | --- | | Dividends, interest, rent | 10% | 10% | | Royalties (individual / company) | 5% / 10% | 10% | | Consultancy, professional, technical, management fees | 5% | 10% | | Commission, brokerage | 5% | 10% | | Construction of roads, bridges, buildings, power plants | 2% | 5% | | All other construction-related work | 5% | 5% | | Supply of goods, supply of services | 2% | 5% | | Directors' fees (individuals only) | 15% | 20% |

The 2% construction rate covers the primary construction contract only. Survey, design, deliveries and similar ancillary work is 5%, not 2% — a distinction contractors lose money on regularly.

The full matrix, including every entity and residency combination, is on the WHT rate page.

No TIN? The rate doubles

If your vendor has no valid TIN, the deduction doubles — capped at 20%. So a 5% consultancy deduction becomes 10%; a 2% supply deduction becomes 4%.

The doubling does not apply to passive income. Dividends, interest, rent and royalties stay at their stated rate regardless of TIN.

Collecting a vendor's TIN before you pay is cheaper than explaining the deduction afterwards.

When you do not have to deduct at all

Deducting when you should not is its own problem — you have taken money that was not yours to take.

The most-missed exemption: a manufacturer or producer supplying its own goods. No deduction. The obligation applies to intermediaries and resellers, not to the person who made the thing. If you buy direct from the factory, do not withhold.

Also outside the regime: across-the-counter retail sales; interest a bank collects by direct debit; REIT and REIC distributions; telephone, data and airline tickets; reimbursed out-of-pocket expenses itemised separately (only the fee element is deductible from); petroleum products; and income that is itself tax-exempt.

And the conditional one: no deduction where all three hold together — you are a small company, the month's transactions with that vendor total under ₦2,000,000, and the vendor has a valid TIN. Fail any one and the obligation revives. See am I a small company?.

When to remit

Two dates, and they are easy to swap:

• Federal WHT — deducted from companies and non-residents, remitted to the NRS — by the 21st of the following month.
• State WHT — deducted from individuals and unincorporated bodies, remitted to the relevant state revenue service — by the 30th of the following month.

Which one applies depends on who you paid, not on who you are.

What getting it wrong costs

Failing to deduct: 40% of the amount you should have deducted, plus interest — and you still owe the deduction itself. Under the old regime this penalty was 10%; it quadrupled in 2026.

Deducting but failing to remit: 10% of the amount, plus interest.

Interest runs at the CBN Monetary Policy Rate plus a spread the NRS has not yet set. The penalty estimator shows the exposure, with the caveat that the spread is unknown, so the figure is a floor.

The asymmetry is the point: not deducting is treated as four times worse than deducting late. If you are unsure whether to withhold, the cheap error is to withhold and issue the credit note.

Keep the credit notes

Where a deduction is creditable, you need the credit note to claim it. No note, no credit — you paid the tax and cannot prove it. Ask at the point of payment, not at the point of filing.

Check any rate here against the WHT rate reference before relying on it, and read the disclaimer. The final-tax treatment of resident professional and consultancy fees follows our reading of the 2024 Regulations and should be confirmed against the gazette.