Withholding Tax in Nigeria is already part of your financial reality. Whether you realize it or not. As long as you earn, spend, or do business in Nigeria. Withholding Tax (WHT)It’s not a separate tax. It’s not another type of tax like the Companies Income Tax (CIT), Personal Income Tax (PIT) or Petroleum Profit Tax (PPT).
From freelancers and contractors to corporations and foreign investors, WHT affects how money moves and how taxes are tracked.
Withholding Tax (WHT) is one of the most common taxes in Nigeria, but many people still don’t fully understand how it works. Whether you’re a freelancer, business owner, contractor, or employee, this guide breaks down what WTH is and how the new 2025 Tax laws affect it.
What Is Withholding Tax in Nigeria?
Withholding tax is not a standalone deduction, but a way for the government to collect income tax early.
When a business or a government entity pays another business or individual for goods and services, the payer “withhold” a small percentage of the payment and send it to the tax authority (FIRS or State IRS) on your behalf.
It’s not an extra tax, it’s part of your income tax. You can use it later to reduce your final tax bill when you file your annual returns.
So instead of paying your full CIT or PIT (for freelancers) at once, you’re essentially paying it in bits throughout the year via WHT deductions.
Also Read: Nigeria’s 5% Fuel Tax: It’s Not Just About the Money
Withholding Tax Rates in Nigeria Based on Tax Laws 2025
Here’s a simple breakdown of WHT rates by category:
| Transaction Type | Recipient Type | Old Rate | New Rate |
| Professional, Consultancy, Technical Fee | Individual | 5% | 5% |
| Company | 10% | 7.5% | |
| Rent (Land & Building) | Individual | 10% | 10% |
| Company | 10% | 7.5% | |
| Royalties | Individual | 5% | 5% |
| Company | 10% | 7.5% | |
| Dividends | All | 10% | 10% |
| Interest | All | 10% | 10% |
| Contracts (General) | Individual | 5% | 5% |
| Company | 5% | 5% | |
| Management Fees | Company | 10% | 7.5% |
| Commission | All | 10% | 10% |
| Construction Contracts | Company | 5% | 5% |
| Supply of Goods | Company | 5% | 5% |
| Agricultural Services | All | 5% | 0% |
| Manufacturing Services | All | 5% | 0% |
| Non-Resident Companies (Digital Services) | Foreign Entity | 10% | 10% (Final Tax) |
| Transactions without Valid TIN | All | – | Double applicable rate |
Note: Rates may vary slightly by state or sector. Always confirm with FIRS or your State IRS.
How to Calculate Withholding Tax in Nigeria
WHT = Payment Amount × Applicable Rate
Example1: ₦200,000 paid for consulting × 5% = ₦10,000 WHT You receive ₦190,000, and ₦10,000 goes to FIRS.
Example2: You earn ₦500,000 for a service. WHT = ₦500,000 × 5% = ₦25,000 You receive ₦475,000, and ₦25,000 goes to the tax office.
Want to Know how much Tax leaves your Salary? Try this Personal Income Tax Calculator in Nigeria
New Withholding Tax Rules in Nigeria (2025)
- You can now use WHT credits to offset other taxes within 24 months.
- Filing and remittance must be done online through the FIRS portal.
- You must have a Tax Identification Number (TIN) to claim WHT credits.
How to Comply to NEW WHT Tax Laws
The most important thing to do now as an individual or business is to get your Tax Identification Number (TIN).
For individuals you have Keep all WHT receipts or credit notes, use your TIN to track and claim WHT credits. Also include WHT in your annual tax filing.
While for Businesses, you have to deduct WHT correctly and remit to FIRS by the 21st of the next month, file monthly WHT returns online. and issue WHT credit notes to vendors.
Withholding Tax is part of Nigeria’s tax system that helps the government collect revenue early. It’s not a penalty or an extra tax; it’s a prepayment that can help you manage your tax bill. Whether you’re earning income or making payments, understanding WHT helps you stay compliant and avoid surprises.
Keep your records. Know your rates. And always ask for your credit note.