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WITHHOLDING TAX IN NIGERIA (2025): MEANING, RATES, ADMINISTRATION, COMPLIANCE, BENEFITS AND PRACTICAL GUIDE

Withholding Tax (WHT) is one of the most effective tools for curbing tax evasion and ensuring early collection of revenue in Nigeria. Under the new tax reform framework, the Deduction of Tax at Source (Withholding) Regulations 2024—which took effect on 1 January 2025—have significantly streamlined the administration of WHT and revised some rates on qualifying transactions. The legislation, including the Nigeria Tax Act (NTA) 2025 and the Nigeria Tax Administration Act (NTAA) 2025, represents a significant reform aimed at harmonising tax administration, enhancing compliance, and strengthening the country’s fiscal system.

This comprehensive guide examines the meaning, rates, administration, compliance requirements, benefits, and practical implications of Withholding Tax in Nigeria under the 2025 reforms.

Close-up of a W-4 form resting on a rustic wooden table, highlighting textures.

The Pain Points: Why Withholding Tax Matters Now More Than Ever

The Classification Confusion

One of the most common pain points for businesses is understanding which transactions are subject to WHT and which are exempt. The Regulations have now replaced the ambiguous WHT exemption for “sales in the ordinary course of business” with a clear enumeration of transactions that will not attract WHT. However, the complexity of the list still creates confusion for many businesses.

The Compliance Burden on Withholding Agents

Payers—including corporate entities, government ministries, and statutory bodies—must perform the deduction of tax, remit it to the appropriate tax authority, and file returns within strict deadlines. For the Federal Inland Revenue Service, this must be done no later than the 21st day of the month following payment. For State revenue authorities, the deadline may be as early as the 10th day of the month.

The Non-Resident Registration Trap

Foreign companies that consider withholding tax their final obligation in Nigeria are facing a new challenge: mandatory registration. Local firms now risk a N5 million penalty for contracting unregistered entities, putting pressure on cross-border deals. Section 100(2) of the NTAA states that “a statutory body or company that awards a contract to an unregistered person shall be liable to pay an administrative penalty of N5,000,000”.

The TIN Double Rate Penalty

Vendors without a valid Taxpayer Identification Number (TIN) will be charged twice the prescribed WHT rate, up to 20%. This creates a significant financial disincentive for non-compliance and places the burden on the withholding agent to verify the vendor’s TIN.

The Failure to Deduct Penalty

The Regulations impose severe penalties for failure to deduct WHT: 40% of the amount not deducted. Failure to remit attracts 10% of the amount not remitted plus interest at the prevailing CBN Monetary Policy Rate (MPR). Upon conviction, the person who failed to deduct may also face imprisonment of not more than three years.

What Is Withholding Tax?

Withholding Tax (WHT) is not another type of tax, but rather the deduction of tax at source from payments made in certain transactions to a taxable person from the supply of goods or services. It is an advanced method of income tax payment, designed to collect taxes early and curb tax evasion.

The Nature of WHT

WHT is not a separate tax. It should not be included in a supplier’s contract price through a tax gross-up, unless expressly agreed in the contract. It is an advance payment of income tax for the supplier (or final tax in certain circumstances).

WHT as Advance Tax or Final Tax

Resident suppliers: WHT is an advance payment of their income tax liability. They can claim credit for WHT deducted when filing their annual tax returns.
Non-resident suppliers: WHT may constitute the final tax to be paid by the non-resident company (NRC) where the income is not attributable to a Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria.

Withholding Tax Rates Under the Regulations

The WHT Regulations 2024 revised some rates on qualifying transactions. Below is the comprehensive rate table:

Transaction Type	Corporate Recipients (Resident)	Corporate Recipients (Non-resident)	Non-corporate Recipients (Resident)	Non-corporate Recipients (Non-resident)
Dividends, interest, rent, royalty	10%	10%	10%	10%
Commission, consultancy, technical, management, professional fees	5%	10% (final tax)	5%	10%
Supply of goods/materials (not by manufacturer/producer)	2%	N/A	2%	N/A
Co-location and telecommunication tower services	2%	5%	2%	5%
Supply/rendering of services (not listed in schedule)	2%	5%	2%	5%
Construction (roads, bridges, buildings, power plants)	2%	5%	2%	5%
Other forms of construction and related activities	5%	10% (final tax)	5%	10%
Brokerage fees	5%	10%	5%	10%
Directors’ fees	N/A	N/A	15%	20%
Entertainers and sportspersons	N/A	15%	N/A	15%
Compensation for loss of employment	N/A	N/A	10%	10%
Winnings from lottery, gaming, reality shows, etc.	N/A	N/A	5%	15%

Key Rate Changes

Directors’ fees have increased from 10% to 15% for resident directors, and to 20% for non-resident directors.

Rates for certain construction and service categories have been reduced to 2% for resident recipients and 5% for non-residents.

Technical, management, professional, and consultancy services by non-residents remain at 10%, which is a final tax.

The Double WHT Rate for Suppliers Without TIN

The Regulations have introduced a double WHT rate where the supplier has no Taxpayer Identification Number (TIN). This implies that vendors without a TIN will be charged twice the prescribed WHT rate, up to 20%. This provision is only applicable in cases of rendering of services or any eligible transaction involving non-passive income.

Practical Note: This double rate encourages vendors to register for tax and obtain a TIN. It also places the burden on the withholding agent to verify the vendor’s TIN before making payment.

Transactions Exempt from Withholding Tax

The Regulations specify several categories of transactions exempted from WHT deductions:

Goods manufactured or materials produced by the person making the supply. Manufacturing/production includes the production of energy, including electricity, gas, and petroleum products.
Compensating payments under a Registered Securities Lending Transaction.
Distribution or dividend payment to a Real Estate Investment Trust or Real Estate Investment Company.
Across-the-counter transactions: Transactions carried out between parties without an established or prior contractual relationship and in which payment is made on the spot.
Interest and fees paid to a Nigerian bank by way of direct debits to accounts in the banks.
Out-of-pocket expenses normally expected to be incurred by the supplier, distinguishable from contract fees.
Insurance premiums.
Supply of specific petroleum products: Liquefied Petroleum Gas, Compressed Natural Gas (CNG), Premium Motor Spirit (PMS), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO), Dual Purpose Kerosene (DPK) and JET-A1.
Commission retained by broker from monies collected on behalf of principal in line with industry norm.
Winnings from a game of chance or a reality show with contents designed to promote entrepreneurship, academics, and technological or scientific innovation.
Imported goods where the transaction does not create a taxable presence in Nigeria for the foreign supplier.
Any payment in respect of income or profit which is exempt from tax.

Important Note: An exemption from WHT deduction does not mean that the income is exempted from the relevant income tax, except where the income is also exempted from tax under the enabling statute.

Persons Exempted from WHT Deduction Obligations

The Regulations exempt certain persons from the obligation to deduct WHT:

Small businesses and unincorporated entities with turnover of ₦25,000,000 or less are exempted from deducting WHT on the condition that:
- Their vendor has a valid TIN
- The value of the transaction is ₦2,000,000 or less during the relevant calendar month
Individuals are not permitted to deduct tax under any circumstance.

Practical Note: Where these conditions are not met, the small company or unincorporated entity making the payment will need to deduct the tax at the applicable rate and remit the amount deducted to the relevant tax authority. Individuals are not permitted to deduct tax under any circumstance.

Administration and Compliance Obligations

Who Must Deduct WHT?

The Regulations require all entities to deduct WHT, including:

Corporate or unincorporated entities (other than individuals)
Government ministries, departments, and agencies
Statutory bodies
Public authorities
Any other institution, organization, establishment, or enterprise (including those exempt from tax)
Payment agents representing any of the above-listed persons

Time of Deduction

The timing of WHT deduction depends on whether the transaction is with a third party or a related party:

Third-party suppliers: WHT is deducted when the payment is made or when the amount due is settled—whichever occurs first.

Related-party suppliers: WHT is deducted at the time of payment or when the liability is recognised, whichever is earlier.

Remittance Deadlines

The Regulations provide strict deadlines for remitting WHT:

Tax Authority	Deadline
Federal Inland Revenue Service (FIRS)	21st day of the month following payment
State Inland Revenue Service (Capital Gains Tax or PAYE)	10th day of the month following payment
State Inland Revenue Service (other deductions)	30th day of the month following payment

Reporting Requirements

WHT must be filed by the 21st day of the month following payment. The filer must submit an electronic monthly schedule of all suppliers, including:

TIN
Address
Nature of transaction
WHT deducted
Invoice number

The payer must also issue tax credit certificates for WHT deducted and paid.

Penalties for Non-Compliance

The Regulations and enabling legislation impose severe penalties for non-compliance with WHT obligations:

Failure to Deduct WHT

40% of the amount not deducted
Plus potential imprisonment of not more than three years upon conviction

Failure to Remit WHT

10% of the amount not remitted
Plus interest at the prevailing CBN Monetary Policy Rate (MPR)

Failure to Register (Non-Resident Companies)

Double withholding tax rate (failure to register for TIN)
N5 million penalty for Nigerian companies that contract unregistered foreign vendors

Late Filing

Administrative penalties as prescribed under the relevant tax legislation

Recent Developments

10% WHT on Short-Term Securities Interest

On 28 October 2025, the FIRS issued a directive requiring Banks, Discount Houses, and Stockbrokers to deduct a 10% WHT on interest payments to investors on short-term securities such as Treasury bills, corporate bonds, promissory notes, and commercial papers. This ended a decade-long exemption that lapsed in 2022.

The only financial instrument that continues to enjoy an exemption from tax is Bonds issued by the Federal Government of Nigeria (FGN).

10% WHT on Interest on FX Domiciliary Accounts

Effective January 2026, a 10% WHT applies to interest earned on foreign currency (FX) or dollar savings accounts. Banks deduct the tax at source at the point interest is credited, treating it the same as interest on naira savings accounts.

Exemption: Interest on Federal and State Government Bonds remains exempt.

Non-Resident Registration Obligations

Under the NTAA 2025, local firms now risk a N5 million penalty for contracting unregistered foreign entities. Even when WHT fully settles a non-resident company’s income tax liability, failing to register can now delay contracts, disrupt payments, and strain commercial relationships. Section 100(2) of the NTAA states that “a statutory body or company that awards a contract to an unregistered person shall be liable to pay an administrative penalty of N5,000,000”.

Final WHT for Non-Resident Companies

The WHT deducted on payments to non-resident companies should constitute the final tax, unless the income is attributable to a PE or SEP of the NRC. However, the recent reforms “do not amount to a wholesale expansion of taxing rights over nonresident companies,” and the principle of final WHT remains embedded in the law.

Practical Guide for Businesses

1. Verify Supplier TIN Before Payment

Always verify that your supplier has a valid TIN before making payment. The absence of a TIN will result in double the prescribed WHT rate being deducted, which could create disputes with suppliers and strain commercial relationships.

2. Determine the Correct WHT Rate

Confirm the correct WHT rate for each transaction based on the supplier’s status (corporate/non-corporate, resident/non-resident) and the nature of the transaction.

3. Adopt Clear Contract Language

Contracts should clearly specify whether WHT is included in the quoted price or will be deducted. If not specified, the default position is that WHT is deducted from the payment, not added on top of it.

4. Ensure Timely Remittance

Remit WHT to the appropriate tax authority by the 21st day of the month following the deduction. For State revenue taxes, the deadline may be as early as the 10th day.

5. Maintain Detailed Records

Keep accurate records of all WHT deductions, remittances, and tax credit certificates. Submit electronic monthly schedules of all suppliers to the tax authority.

6. Issue Tax Credit Certificates

Issue tax credit certificates to suppliers for WHT deducted and paid. The certificate serves as evidence of the deduction and can be used by the supplier to claim a credit against their income tax liability.

7. Monitor Exemptions and Reliefs

Stay up to date with exemptions and reliefs, including the small company exemption and exempt transactions, as these can significantly reduce compliance obligations.

8. Register Non-Resident Suppliers

Ensure non-resident suppliers are registered for tax purposes. Local firms risk a N5 million penalty for contracting unregistered foreign entities.

9. Seek Professional Advice

Given the complexity of the new regulations and the severe penalties for non-compliance, businesses are strongly advised to seek professional guidance to ensure full compliance and optimise their WHT position.

How Qeeva Advisory Helps with Withholding Tax Compliance

At Qeeva Advisory, we understand that navigating Withholding Tax compliance under the NTA 2025 and the WHT Regulations 2024 can be complex. Our team of experienced professionals helps Nigerian businesses and non-resident companies understand their WHT obligations and ensure compliance.

Our Core Services

Advisory Services Nigeria – Our advisory professionals help you understand your WHT obligations, determine correct rates, and develop compliance strategies.

Tax Strategies and Planning – We help you structure transactions to optimize WHT outcomes and claim applicable treaty benefits.

Regulatory Compliance – We ensure your WHT filings meet all regulatory requirements and are filed on time.

Bookkeeping Services – Accurate records are essential for WHT compliance. Our bookkeeping services ensure your records are accurate and complete.

Risk Management – We help you identify and manage risks associated with WHT compliance, including audit risks and penalties.

Frequently Asked Questions

Q: What is Withholding Tax?
A: WHT is not a separate tax but an advance collection of income tax from payments made in certain transactions, such as dividends, interest, rent, and professional services.

Q: What is the WHT rate on interest?
A: The rate is 10% for all recipients, except for FGN bonds which remain exempt.

Q: Are small companies exempt from WHT deduction obligations?
A: Yes, if they have turnover of ₦25 million or less, their vendor has a valid TIN, and the transaction value is ₦2 million or less per month.

Q: What is the penalty for failure to deduct WHT?
A: 40% of the amount not deducted.

Q: What is the deadline for WHT remittance?
A: FIRS remittances must be filed by the 21st day of the month following payment.

Q: What is the WHT rate for directors’ fees?
A: 15% for resident directors and 20% for non-resident directors.

Q: Are Treasury bills subject to WHT?
A: Yes. The FIRS has confirmed that a 10% WHT applies to interest from Treasury bills and other short-term securities, as the exemption Order lapsed in 2022.

Q: What are the consequences of the TIN double rate provision?
A: Vendors without a TIN are subject to double the prescribed WHT rate, up to 20%.

The Bottom Line

The NTA 2025 and the Withholding Tax Regulations 2024 have significantly modernised the administration of Withholding Tax in Nigeria. The reforms bring clarity, enhanced compliance, and stronger enforcement mechanisms.

Key Takeaways:

Understand the Nature of WHT: WHT is not a separate tax but an advance payment of income tax. It should be deducted from the payment, not added on top, unless expressly agreed in the contract.

Know the Rates: Different rates apply depending on the transaction type and the recipient’s status. Refer to the comprehensive rate table above for guidance.

Be Aware of Exemptions: Certain transactions and persons are exempt from WHT deduction obligations. The small company exemption, exempt transactions, and securities lending relief are key benefits to note.

Meet Compliance Deadlines: WHT must be remitted by the 21st day of the month following payment. Late remittance attracts penalties and interest.

Avoid Penalties: Failure to deduct WHT can result in a 40% penalty; failure to remit can result in a 10% penalty plus interest, and potential imprisonment.

Register Non-Resident Suppliers: Local firms risk a N5 million penalty for contracting unregistered foreign entities.

Your job is to be prepared. Understand your WHT obligations. Determine correct rates. Meet deadlines. Maintain proper records. Seek professional guidance.

With the right approach and the right partner, you can turn WHT compliance from a burden into a manageable and transparent process.

Reference Links / Sources

Andersen Nigeria – FIRS Issues Public Notice on Withholding Tax on Short-Term Securities – Details on 10% WHT on Treasury bills, corporate bonds, and short-term securities

TEMPLARS Law – Withholding Tax Regulations 2024 Matters Arising – Analysis of revised WHT rates including directors’ fees increase

DLA Piper – Real Estate Taxation Summary – Exemption for REIT distributions from WHT

PwC – Nigeria Corporate Withholding Taxes – Comprehensive WHT rate table, compliance obligations, penalties, and DTT treatment

Nigerian Journals Online – WHT Administration in Nigeria – Legal framework analysis, institutional arrangements, and challenges

Ecofin Agency – Nigeria Imposes 10% WHT on Short-Term Securities – FIRS directive on 10% WHT for Treasury bills, corporate bonds, and commercial papers

Trading Economics – Nigeria Withholding Tax Rate – Summary of WHT rate at 10%

KPMG – Nigeria Tax Act 2025 Reforms – Payment-based taxation, double WHT rate for non-registered NRCs, and TIN penalties

Mondaq – Deduction of Tax at Source Regulations 2024 – WHT rate table, small company exemption, TIN double rate, and exempt transactions

Lexology – Withholding Regulations 2024 Overview – Small company exemption conditions, double TIN rate, and exempt transactions

BusinessDay – Foreign firms must register or risk losing Nigerian contracts – N5 million penalty for contracting unregistered vendors, registration compliance shift

Chambers and Partners – Corporate Tax 2026 Nigeria – Final WHT for non-residents and 4% minimum tax provision

The Sun Nigeria – Banks explain 10% FX savings tax – 10% WHT on interest from FX domiciliary accounts from January 2026

Mondaq – Understanding WHT Regulations Guide – Time of deduction, remittance deadlines, penalties, and compliance obligations

Let’s Talk About Your Withholding Tax Needs

Navigating Withholding Tax compliance under the NTA 2025 can be complex. At Qeeva Advisory, we understand the challenges faced by Nigerian businesses and non-resident companies in understanding their WHT obligations, determining correct rates, and ensuring compliance.

Whether you need help with WHT compliance, tax planning, or dispute resolution, we are here to support you.

📞 Call us: (+234) 802 320 0801, (+234) 807 576 5799

📧 Email: info@qeeva.com

📍 Visit us: 5, Ishola Bello Close, Off Iyalla Street, Alausa, Ikeja, Lagos, Nigeria

Contact us today to schedule a consultation. Let us help you navigate Withholding Tax compliance with confidence.

Your journey to tax compliance starts with a conversation. Let’s talk.