April 12, 2018
May 17, 2018




Withholding tax (WHT) is not a separate tax type and therefore has no legislation of its own; it is only a mechanism for the collection of other taxes. Thus, its application is provided for in the enabling law of other tax types i.e. Section 81 of Company Income Tax Act (CITA), Section 54 of Petroleum Profit Tax Act (PPTA), Section 73 of Personal Income Tax Act (PITA) and Section 13 of Value Added Tax Act (VAT).

The main purpose of WHT is to reduce Tax Evasion. The Federal Inland Revenue Service (FIRS) and the State Inland Revenue Service (SIRS) are the collecting authorities of WHT; depending on the type of business (SIRS collects for sole proprietorship, partnership and enterprises while FIRS collects for private and public companies). Withholding Tax Rates can be 5% or 10% depending on the type of business where the income was generated and 7.5% for companies whose countries have Double Tax Treaties with Nigeria.

The period for filing withholding tax is 21 days after the month it was deducted.

The penalty for failure to deduct or remit tax is 10% plus interest of the amount not deducted/remitted.

It should be noted that when submitting withholding tax, a schedule of all suppliers showing Tax identification Number (TIN), address, nature of transaction, withholding tax deducted and invoice number must be attached.


If a private company supplies goods or services to another company worth N 200,000 at the rate of WHT rate of 10%. The vendor will deduct N20,000 from the total sum and remit to the relevant tax authority. An evidence of remittance called Withholding tax credit note will be obtained by the vendor which will then be given to the supplier.

The credit note is be used to reduce only income Tax payable and not Education Tax , PAYE or any other form of taxes.

NOTE: Credit note is used in the year it was collected and can be carried forward to subsequent year but, cannot be used retrospectively. i.e Credit note for 2013 cannot be used to reduce Income Tax Payable of 2012 but can be used for 2014 and above.

Although to carry forward credit notes a request must be sent to the Federal Inland Revenue Service Head quarters.




Types of payment WHT for


WHT for

individuals %

Dividends, interest, and rents 10 10
Directors fees N/A 10
Hire of equipment 10 10
Royalties 10 5
Commission, consultancy, technical, service fees 10 5
Management fees 10 5
Construction/building (excluding survey, design, and deliveries) 5 5
Contracts other than sales in the ordinary course of


5 5


Double tax treaties (DTTs)

Nigeria has DTTs with the countries listed in the table below. Nigeria also has tax treaties with Kenya, Mauritius, and Poland; however, these treaties have not been ratified by the Nigerian National Assembly. The tax treaties with South Korea, Spain, and Sweden are still in the process of being ratified.

Recipient WHT (%)
Dividend interest Royalties Management/

Technical fees

Non-treaty 10 10 10 10
Belgium 7.5 7.5 7.5 10
Canada 7.5 7.5 7.5 10
China 7.5 7.5 7.5 10
Czech Republic 7.5 7.5 7.5 10
France 7.5 7.5 7.5 10
Netherlands 7.5 7.5 7.5 10
Pakistan 7.5 7.5 7.5 10
Philippines 7.5 7.5 7.5 10
Romania 7.5 7.5 7.5 10
Slovakia 7.5 7.5 7.5 10
South Africa 7.5 7.5 7.5 10
South Korea 7.5 7.5 7.5 10
Spain 7.5 7.5 7.5 10
Sweden 7.5 7.5 7.5 10
United Kingdom 7.5 7.5 7.5 10

The tax treaties with South Korea, Spain and Sweden are still being ratified.



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