With the effective take-off of the four New Tax Laws on 1st January 2026 and the renewed drive for the Nigeria Revenue Service (NRS – formerly FIRS) to now seriously enforce all extant Tax Laws. As your Licensed Tax Consultant, and as an advisory, I hereby draw your attention to the need for your strict compliance with the requirements of these laws, with particular reference to Value Added Tax (VAT) and Withholding Tax (WHT).
VAT remains unchanged at a flat rate of 7.5% on all qualifying transactions. This memo will focus on WHT, which, although not new, is often misunderstood by many people.
WHAT IS WITHHOLDING TAX (WHT)?
Withholding Tax is a tax deducted at source when certain payments are made.
The person making the payment deducts tax before paying the recipient and remits it to the government.
It is not an extra tax. It is an advance payment of income tax that the recipient later uses as a tax credit.
Whom Does Withholding Tax Apply To?
1️⃣ The Deductor (Person Who Deducts the Tax)
They include Companies, Government agencies, NGOs, and Business owners making qualifying payments
They are legally responsible for deducting WHT, remitting it on time, and filing the WHT schedule
2️⃣ The Deductee (Person Whose Money Is Deducted)
It includes individuals, Sole proprietors, Partnerships, and Limited Liability companies
They use the WHT deducted as a credit when filing Company Income Tax (CIT), or Personal Income Tax (PIT)
WITHHOLDING TAX RATES IN NGERIA
For RESIDENT recipients
Type of Payment WHT Rate
Dividends 10%
Interest 10%
Rent / Hire / Lease 10%
Royalty (individual) 5%
Royalty (company) 10%
Consultancy / Professional / Technical fees 5%
Commission / Brokerage fees 5%
Directors’ fees 15%
Supply of goods (non-manufacturer) 2%
General services (not otherwise classified) 2%
Construction (roads, buildings, bridges) 2%
Other construction-related services 5%
Telecom tower/co-location services 2%
Lottery & gaming winnings 5%
For NON-RESIDENT recipients
Type of Payment WHT Rate
Dividends 10%
Interest 10%
Rent 10%
Royalty 5% / 10%
Consultancy / Professional / Technical fees 10% (final tax)
Commission / Brokerage 10%
Construction & services 5%
Directors’ fees 20%
Entertainers & sportspersons 15%
Lottery & gaming winnings 15%
If the recipient does not have a valid TIN, the WHT rate may be doubled.
How Is Withholding Tax Calculated?
Example:
A business pays a consultant ₦500,000
WHT rate (resident consultancy) = 5%
WHT deducted = ₦25,000
Net payment to consultant = ₦475,000
₦25,000 is remitted to the tax authority
How Is Withholding Tax Filed and Remitted?
Step 1: Deduct the tax
Deduct WHT at payment or when the invoice is settled, whichever comes first.
Step 2: Remit to the right tax authority
For LTD Companies – to the Federal Inland Revenue Service (FIRS), now named NRS
For Individuals / Sole proprietors – to State Internal Revenue Service (SIRS)
Deadline:
Within 21 days after the month of deduction
Step 3: File WHT schedule
Submit:
WHT schedule (names, amounts, TINs, tax deducted)
Evidence of payment
Step 4: Issue WHT credit note
The recipient uses the credit note to:
Reduce Company Income Tax (CIT), or
Reduce Personal Income Tax (PIT)
What Happens If WHT Is Not Deducted and/or Remitted?
Failure to deduct/remit attracts:
10% penalty
Plus, Interest in the commercial rate
Risk of tax audit and enforcement action
Do not hesitate to contact Dr. Austin Ejaife at DAE Professionals on +(234)703 166 4488 if you require further assistance.