What Is Withholding Tax (WHT) in Nigeria?

Short answer: Withholding tax (WHT) is tax deducted at source when you pay certain vendors, contractors, or service providers. The payer withholds a percentage, remits it to the tax authority, and gives the recipient a WHT credit note they can use against their own tax bill.

If you run a business, hire freelancers, or receive contract payments, WHT shows up sooner or later. It is not the same as PAYE on salaries, though both involve withholding.

WHT in plain English

Imagine you pay a consultant ₦500,000 for a project. Depending on the transaction type, you may withhold 5% or 10% (rates vary by payment category) and pay that portion to the tax authority on their behalf.

The consultant gets:

• Net cash in their account (after WHT)
• A WHT credit note proving tax was withheld

They use the credit note when filing their own taxes so they are not taxed twice on the same income.

Who deducts WHT?

Usually the payer (your company) deducts when:

• Paying contractors for professional services
• Paying rent, dividends, interest, or certain royalties
• Other categories listed in current tax guidance

Employees on payroll are generally under PAYE, not WHT, for salary.

Common WHT rates (illustrative)

Rates depend on payment type and current law. Typical examples people encounter:

Always confirm the rate for your specific transaction with current official guidance or a tax adviser.

WHT vs PAYE vs VAT

Three different workflows. Mixing them up causes filing errors.

2026 reforms small businesses should know

Under recent reforms, some small-value payments may have simplified WHT treatment when suppliers have valid TINs and amounts stay below certain monthly thresholds. Rules change; verify against current NRS/FIRS guidance before assuming exemption.

What to do when you receive a WHT deduction

1. Confirm the gross invoice amount vs net paid
2. Request a WHT credit note from the payer
3. Keep it for annual tax filing
4. Reconcile with your bank credit

If a client withholds without documentation, chase the credit note before year-end.

What to do when you pay contractors

• Collect TIN and invoice details upfront
• Deduct WHT where required
• Remit within 21 days (standard window; confirm current rule)
• Issue credit notes promptly

Sloppy contractor pay creates audit pain later.

Red flags

• Client pays "gross" but expects you to absorb WHT silently
• No credit note after deduction
• WHT deducted on salary misclassified as contract work