Withholding Tax (WHT) in Nigeria: How It Works for Invoices and Payments

Withholding tax is the reason a corporate customer can pay you less than your invoice and still have paid in full. They hold back a percentage, send it to the tax authority on your behalf, and give you the evidence. Handled well, it's an advance payment of your own income tax. Handled badly, it's money you never see again. This guide covers how it works today, under the Deduction of Tax at Source (Withholding) Regulations 2024 and the 2025 tax reform acts.

The idea in one paragraph

When a company pays for certain goods or services, it deducts tax at source from the payment, remits it to the tax authority, and gives the supplier a receipt or credit note. The supplier later uses that credit against its own income tax. WHT is not an extra tax on the transaction; it's your income tax, collected early by your customer.

The rates that apply most often

The 2024 regulations reset the rate table. For payments to resident companies, these are the rates most invoicing businesses meet (EY; PwC; Regfollower):

Rates for non-residents differ more widely; where we couldn't confirm one, the table says so. Three rules sit alongside it:

• No TIN, double rate. If the supplier can't provide a Tax Identification Number, the rate applied is twice the scheduled rate (EY). For a consultancy, 5% becomes 10%. Giving customers your TIN on every invoice pays for itself.
• Over-the-counter purchases are out. Cash-and-carry retail purchases are excluded from the goods rate.
• Small companies get relief. A company with turnover of ₦25 million or less a year doesn't have to deduct WHT when paying a supplier that has a valid TIN, as long as transactions with that supplier come to ₦2,000,000 or less in the month (PwC). Above that, the normal rules apply.

Sources disagree on the regulations' start date: several give 1 July 2024, PwC's summary gives 1 January 2025 with early application allowed. For transactions today, the difference no longer matters.

A worked example

Bakare Advisory, a resident company, invoices Adebayo & Co. Logistics for a process review.

The 5% is applied to the fee, ₦1,000,000, not to the VAT. Adebayo & Co. remits ₦50,000 and sends Bakare Advisory the receipt. Bakare Advisory records:

• the invoice as fully settled: ₦1,025,000 cash plus ₦50,000 WHT credit;
• a WHT receivable of ₦50,000, to offset against its company income tax.

If Bakare Advisory had no TIN on file with the customer, the deduction would have been 10%, ₦100,000, and the cash received ₦975,000.

On the receiving end: don't lose the credit

The supplier side is where money goes missing:

1. The payment looks short. ₦1,025,000 arrives against a ₦1,075,000 invoice. Someone has to know that the ₦50,000 gap is WHT, not a short payment, and record it that way.
2. The credit note never arrives. The deducting company must issue a receipt showing the payee's name, address and TIN when it remits (Mondaq). Chase it monthly, not at year end.
3. The credit isn't claimed. Unclaimed credits are simply overpaid tax.

Keep a schedule of every WHT deduction: customer, invoice, amount, date of payment, and whether the receipt has arrived. It is the only way to reconcile the credit against your tax account.

On the paying end: deduct, remit, document

If your company pays suppliers, you're a collecting agent. The obligations:

• Deduct at the right rate when you pay, not when you receive the invoice.
• Remit to the right authority. Deductions from companies go to the NRS; deductions from individuals and unincorporated businesses go to the state internal revenue service.
• Meet the deadline. Commentary on the current rules puts remittance to the NRS at the 21st day of the following month, with deductions for state services due later in the month (Mondaq). Late remittance is reported to attract a 10% penalty on the amount plus interest. We found these dates in professional commentary rather than the statute text, so confirm them for your situation.
• Issue the receipt to the supplier.

A practical point for finance teams: WHT belongs in the payment voucher. If the voucher shows the gross amount, the deduction and the net payment, the approver sees exactly what will be paid and remitted.

How Flux helps

Flux handles WHT on invoices alongside VAT, and keeps your customers' TIN, VAT and RC numbers on file so they appear on every invoice. When an online payment comes in below the invoice total, Flux doesn't quietly mark it paid: the invoice stays open and is flagged for review, so someone decides whether the gap is WHT or a genuine short payment. Tax & Reporting produces WHT reports and exports, giving you the schedule your adviser needs. Flux prepares the figures; remittance and filing remain yours. See Tax & Reporting.