Withholding Tax (WHT) remains one of the most misunderstood – and most penalised – aspects of tax compliance in Nigeria. Despite being deducted at source, errors in WHT treatment continue to expose businesses to penalties, interest, rejected tax credits, and regulatory disputes.
This guide explains what WHT is, how it works in practice, common mistakes businesses make, and how to accurately compute WHT using a practical calculator embedded on this page.
What is Withholding Tax (WHT) in Nigeria?
Withholding Tax (WHT) is not a separate tax. It is a method of collecting income tax at source on specific categories of payments. The government basically begs qualifying entities to collect taxes on their behalf up front – surprised that I used the word ‘beg’?, well you and I know that there are different types of begging. When a payer makes a qualifying payment, a portion of the payment is withheld and remitted to the tax authority on behalf of the recipient.
For most businesses and professionals, WHT serves as:
- An advance payment of income tax
- A tax credit that can be offset against final tax liability
Failure to deduct or remit WHT correctly makes the payer liable, not the recipient.
Why WHT Compliance Matters More Than Ever
Let me let you in on an open secret (the government is broke and in dare need of more money – please don’t tell anyone). And this has made the government through its Regulatory enforcement agent found many ways around monitoring things from the following perspectives:
- Improved data matching by tax authorities
- Mandatory filing of WHT schedules
- Increased tax audits during PAYE, VAT, and CIT reviews
Common consequences of poor WHT compliance include:
- Disallowed expenses during tax audits
- Penalties and interest on late remittance
- Rejected WHT credit notes
- Cashflow strain and reputational damage
Transactions Subject to Withholding Tax in Nigeria
WHT applies to a wide range of transactions, including:
- Consultancy and professional fees
- Technical and management services
- Royalties
- Rent, hire, and lease payments
- Construction and contract services
- Supply of goods (non-manufacturers)
- Directors’ fees
- Dividends and interest
- Entertainment and sports services
Each transaction attracts different rates, depending on:
- Nature of the transaction
- Whether the recipient is corporate or individual
- Whether the recipient is resident or non-resident
This is where most errors occur.
Current WHT Rates in Nigeria (2025/2026 – Practical Overview)
While WHT rates are defined in regulations and circulars, applying them in real life is rarely straightforward.
Examples:
- Consultancy fees to a resident company → 5%
- Consultancy fees to a non-resident company → 10%
- Rent paid to individuals → 10%
- Supply of goods by non-manufacturers → 2%
- Directors’ fees → 15% (resident) / 20% (non-resident)
Memorising these rates is not the issue rather, ensuring that they are consistently applied is the key to everyting. Another reason why we built this free wht tool and urge you to try it out.
Common WHT Mistakes Businesses Make
1. Applying the Wrong Rate
Using resident rates for non-resident vendors (or vice versa) is a frequent audit finding.
2. Treating WHT as Final Tax
For most taxpayers, WHT is creditable, not final – but documentation must be accurate.
3. Poor Record Keeping
Missing or inconsistent WHT schedules often lead to rejected credits.
4. Spreadsheet Dependency
Manual spreadsheets increase error risk, version confusion, and audit exposure.
How to Calculate Withholding Tax Correctly (Step-by-Step)
To calculate WHT correctly, you need to answer three questions for every payment:
- What type of transaction is this?
- Who is receiving the payment (individual or company)?
- Is the recipient resident or non-resident?
Once these are clear, the below easy formular gives you the correct amout. But why bother doing it mannualy when we at Accountant Next Door have done the heavy lifting for you?
WHT = Gross Amount × Applicable WHT Rate
Sounds simple – until you have multiple payments, multiple vendors, and multiple rates in the same month.
Use the Nigeria WHT Calculator on This Page
To eliminate guesswork and calculation errors, we have embedded a Nigeria WHT Calculator directly on this page.
👉 Scroll down to use the calculator
What the calculator helps you do:
- Select transaction type from predefined categories
- Specify recipient type and residency
- Enter payment amounts
- Add multiple entries
- Instantly compute WHT per transaction
- See total WHT exposure at a glance
- Download results as CSV or printable PDF
This allows you to:
- Prepare monthly WHT schedules
- Reconcile vendor payments
- Reduce audit risk
- Improve internal controls
⬇️ Nigeria WHT Calculator (Use Below)
👉 Use the calculator below to compute your WHT accurately
(The calculator runs directly on this page – no installation required.)
Why Using a WHT Calculator Improves Compliance
Using a structured calculator instead of spreadsheets helps you:
- Apply consistent tax rules
- Reduce reliance on memory
- Improve audit defensibility
- Maintain cleaner documentation
- Save time during monthly closings
For accountants and finance teams, tools like this function as internal compliance controls, not just calculators.
WHT Remittance Deadlines in Nigeria
- FIRS: On or before the 21st day of the month following payment
- State Internal Revenue Services: Typically by the 30th day of the following month
Late remittance attracts penalties and interest – even where tax was deducted.
Frequently Asked Questions (FAQs on Withholding Tax)
Is Withholding Tax a final tax in Nigeria?
No. For most taxpayers, WHT is an advance payment and can be credited against income tax.
Who is responsible for deducting WHT?
The payer making the qualifying payment is responsible for deduction and remittance. Remember that ignorance of the law is not an excuse. No room for mgbati mgbati.
Can WHT be refunded?
WHT is usually not refunded but credited against future tax liabilities. The new law requires the person witholding to isssue a receipt to the receipient of the payment.
Do non-residents pay WHT?
Yes. Non-residents are subject to WHT, often at higher rates, unless reduced by a tax treaty like Double Dataxtion Treaty.
What happens if WHT is not deducted?
The payer becomes liable for the tax, penalties, and interest. The fact that you are here reading this tells me that you do not want to be found wanting.
Final Thoughts | Compliance Is Easier With the Right Tools
WHT compliance is not about memorising rates – it is about process, accuracy, and consistency.
Embedding reliable tax tools directly into your workflow:
- Reduces human error
- Improves confidence in filings
- Protects your business during audits
Use the WHT calculator on this page as often as needed to validate your computations and strengthen your tax compliance posture.
Want more practical tax tools? Explore other compliance tools and guides on Accountant Next Door, designed for Nigerian accountants, business owners, and finance professionals. Like PAYE Calculator based on Nigeria Tax Act 2025
Leave a Reply