How WHT Works on Contracts, Rent and Professional Services in Nigeria

How withholding tax applies to contracts, rent, and professional services in Nigeria. Rates, who deducts, how to remit, credit notes, and worked examples under the NTA 2025.

Withholding tax is the tax you never see leave your bank account — because someone else deducts it before you are paid. When a company pays your consulting invoice, they hold back a percentage and remit it directly to the NRS on your behalf. When a tenant pays rent to a landlord, the same applies. When a contractor delivers a supply contract, the paying company withholds before settling the balance.

The idea is simple: collect tax at the point of payment rather than waiting for the recipient to file and pay at year-end. But the execution — which transactions attract WHT, at what rate, who deducts, when to remit, how to issue credit notes, and how to claim the credit — is where Nigerian businesses make costly errors. They deduct the wrong rate, remit late, forget to issue credit notes, or fail to deduct at all and face a 40% penalty.

This guide covers the three most common WHT categories — contracts, rent, and professional services — with the rates, the mechanics, and worked examples that show exactly how WHT flows from deduction to credit.

What Withholding Tax Is and Why It Exists

Withholding tax (WHT) is not a separate tax. It is an advance payment of income tax — collected at the point a payment is made rather than when the recipient files their annual return. When a company deducts 10% WHT from a ₦5,000,000 consulting invoice, the ₦500,000 is not lost to the consultant — it is a credit against the consultant’s annual income tax liability. The consultant receives ₦4,500,000 now and claims the ₦500,000 as tax already paid when they file their return.

The system exists because Nigeria, like most countries, finds it more reliable to collect tax from the payer (who has the money and can be traced) than to wait for the recipient (who may or may not file a return). WHT ensures that tax revenue flows to the government continuously throughout the year, not in a lump sum at filing time — and that even recipients who never file still contribute some tax through the withholding mechanism.

Who Deducts WHT

The obligation to deduct WHT falls on the payer — the person or company making the payment. If you are a company paying a consultant’s invoice, you deduct the WHT. If you are a tenant paying rent, you deduct the WHT (where applicable — see the rent section below). If you are a company paying a contractor for a supply or construction contract, you deduct the WHT.

The payer deducts the WHT from the payment, remits it to the NRS, and issues a WHT credit note to the payee. The payee receives the net payment (invoice amount minus WHT) and the credit note (which they use to offset the WHT against their annual tax liability).

Who Must Deduct

Companies (limited liability companies, public companies, government agencies, statutory bodies) are required to deduct WHT on qualifying payments. Individuals making payments for personal purposes (paying rent for their home, hiring a plumber) are generally not required to deduct WHT — though individuals making payments in the course of a business or profession may be.

In practice, the WHT deduction obligation primarily falls on corporate payers. A company that pays rent to a landlord, fees to a consultant, or invoices to a contractor must deduct WHT. An individual paying their personal landlord for residential rent typically does not.

WHT on Contracts (Supply and Construction)

Contract WHT applies to payments for the supply of goods, the execution of construction contracts, and other contractual arrangements. The rate is 5% for both payments to companies and payments to individuals.

What Qualifies as a Contract

• Supply contracts. A company purchases inventory, raw materials, equipment, or other goods from a supplier. The payment for the supply attracts 5% WHT.
• Construction contracts. Payments for building construction, renovation, road construction, electrical installation, plumbing, and other construction-related work. The rate is 5%.
• Haulage and transport contracts. Payments for goods transport, logistics, and haulage services.
• General supply of services under a contract. Where the service is provided under a formal contract (not a professional or consultancy engagement — those have different rates), the supply attracts 5% WHT.

Worked Example: Supply Contract

BrightStar Manufacturing Ltd purchases ₦20,000,000 worth of raw materials from NaijaSupplies Ltd. The invoice shows:

BrightStar pays ₦20,500,000 to NaijaSupplies (₦20,000,000 net − ₦1,000,000 WHT + ₦1,500,000 VAT). BrightStar remits ₦1,000,000 WHT to the NRS by the 21st of the following month and issues a WHT credit note to NaijaSupplies. NaijaSupplies uses the credit note to offset ₦1,000,000 against its CIT liability at year-end.

Note that WHT is calculated on the net value (₦20,000,000), not the VAT-inclusive amount (₦21,500,000). WHT and VAT are computed independently on the same net base — they do not interact.

Worked Example: Construction Contract

Greenfield Estates Ltd engages BuildRight Construction Ltd to build an office block for ₦150,000,000. Payments are made in three instalments. Each instalment attracts 5% WHT:

Greenfield remits ₦2,250,000 after the first instalment (by the 21st of the following month), ₦3,000,000 after the second, and ₦2,250,000 after the third. Each remittance is accompanied by a WHT credit note issued to BuildRight. BuildRight claims ₦7,500,000 in total WHT credits against its annual CIT liability.

VAT would apply separately on each instalment if the construction service is taxable — the VAT is paid by Greenfield to BuildRight on top of the contract amount, while the WHT is deducted from the contract amount. The two flow in opposite directions.

WHT on Rent

Rent payments attract WHT at 10% — the highest rate among the common transaction types. This applies to rent for commercial premises (offices, warehouses, shops, factories) and, in certain circumstances, residential premises where the payer is a company.

Who Deducts WHT on Rent

The obligation falls on the tenant who is making the payment:

• Company tenant paying rent to any landlord (individual or company): Must deduct 10% WHT.
• Individual tenant paying rent for personal residence: Generally not required to deduct WHT. The obligation applies primarily to corporate tenants and individuals making payments in the course of business.
• Individual tenant paying rent for business premises: Should deduct 10% WHT if the payment is made in the course of a business or profession.

Worked Example: Commercial Rent

TechHub Nigeria Ltd rents office space from PropertyMax Ltd at ₦12,000,000 per year, paid quarterly (₦3,000,000 per quarter).

TechHub pays ₦2,700,000 per quarter to PropertyMax and remits ₦300,000 per quarter to the NRS (by the 21st of the month following each payment). TechHub issues four WHT credit notes during the year. PropertyMax claims ₦1,200,000 in total WHT credits against its CIT liability.

The Nigerian Rent Payment Problem

Nigerian commercial leases typically require rent to be paid annually in advance — not monthly or quarterly. This means the full year’s WHT is due in a single remittance. If TechHub pays ₦12,000,000 in January, it must remit ₦1,200,000 WHT to the NRS by 21 February — a large single payment that many businesses forget to budget for or fail to remit on time.

From the landlord’s perspective, receiving ₦10,800,000 instead of ₦12,000,000 can cause friction — especially if the landlord is an individual who does not understand WHT or does not file tax returns to claim the credit. Many landlords resist WHT deduction, demanding the full amount. The corporate tenant’s legal obligation is clear: you must deduct. Paying the full amount without deducting WHT exposes you to a 40% penalty on the amount not deducted (NTAA Section 105). Communicate the WHT obligation to your landlord upfront, explain that the credit note enables them to offset the WHT against their tax, and include the WHT terms in the tenancy agreement.

Rent on VAT-Inclusive Basis

If the landlord is VAT-registered and charges VAT on the rent (commercial rent is a taxable supply), WHT is calculated on the net rent — not the VAT-inclusive amount.

The tenant pays ₦11,700,000 (₦12,000,000 − ₦1,200,000 WHT + ₦900,000 VAT). The WHT and VAT are independent calculations on the same net rent. Neither is computed on the other.

WHT on Professional and Consultancy Services

This is the WHT category that affects the largest number of Nigerian businesses and professionals. Any payment for professional, consultancy, management, or technical services attracts WHT — at 10% if paid to a company and 5% if paid to an individual.

What Qualifies as Professional/Consultancy Services

• Legal fees (lawyers, solicitors, barristers)
• Accounting and audit fees (chartered accountants, audit firms)
• Tax advisory and compliance fees
• Management consulting fees
• IT consulting and software development fees
• Engineering and architectural fees
• Medical consulting fees (specialist consultations, not hospital services)
• Marketing, advertising, and PR consultancy
• Training and facilitation fees
• Recruitment and HR consulting fees
• Technical services and technical assistance fees
• Management fees charged by parent companies or group entities
• Directors’ fees (where a director is engaged for a specific service beyond their board role)

The key distinction is between a contract for professional/consultancy services (WHT at 10% for companies, 5% for individuals) and a contract for the supply of goods or general services (WHT at 5% for both). If the payment is primarily for intellectual expertise, advice, or specialised knowledge, it falls in the professional/consultancy category. If it is primarily for the delivery of goods, physical labour, or routine services, it falls in the contract/supply category.

Worked Example: Consulting Fee to a Company

Pinnacle Manufacturing Ltd engages OmniStrategy Consulting Ltd to review its supply chain. The consulting fee is ₦8,000,000.

Pinnacle pays ₦7,800,000 to OmniStrategy, remits ₦800,000 to the NRS by the 21st, and issues a WHT credit note. OmniStrategy declares ₦8,000,000 as income on its CIT return and claims the ₦800,000 as a credit against its CIT liability.

Worked Example: Consulting Fee to an Individual

Apex Logistics Ltd engages Bola Adeyemi, a freelance logistics consultant, for a project. The fee is ₦3,000,000.

Apex pays ₦3,075,000 to Bola, remits ₦150,000 to the NRS, and issues a WHT credit note. Bola includes the ₦3,000,000 as business income on her annual PIT return and claims the ₦150,000 WHT credit against her tax liability. The difference between the 5% individual rate and the 10% company rate is significant — Bola’s WHT deduction is ₦150,000, while a consulting firm providing the same service at the same fee would have ₦300,000 deducted.

How to Remit WHT to the NRS

The payer (the company making the deduction) is responsible for remitting the deducted WHT to the NRS. The process:

1. Deduct WHT at the point of payment. When you pay the supplier, contractor, landlord, or consultant, deduct the appropriate WHT percentage from the net payment amount (before VAT).
2. Prepare the WHT schedule. For each month, prepare a schedule listing every WHT deduction: the payee’s name and TIN, the payment type (contract, rent, professional fees), the gross amount, the WHT rate, and the WHT amount deducted.
3. Log into the NRS Self-Service Portal. Go to selfservice.nrs.gov.ng, navigate to the WHT filing section, and enter the details from your schedule.
4. Remit the total WHT. Pay the total WHT deducted during the month through the portal’s payment channels (Remita, direct bank payment, or other approved methods). The deadline is the 21st of the month following the deduction.
5. Issue WHT credit notes. After remittance, generate or prepare a WHT credit note for each payee and deliver it to them. The credit note must show: the payer’s name and TIN, the payee’s name and TIN, the gross amount paid, the WHT rate applied, the WHT amount deducted, the payment date, and the NRS remittance reference.

The Credit Note Is Not Optional

Issuing the WHT credit note is a legal obligation — not a courtesy. The payee needs the credit note to offset the WHT against their annual tax liability. Without it, they cannot claim the credit and are effectively taxed twice on the same income. Under the NTAA 2025, the payer must issue the credit note, and the payee is legally entitled to demand it.

If you are the payee and a client has deducted WHT but not issued a credit note, follow up immediately. Do not wait until year-end — by then, the client’s finance team may have moved on, records may be harder to locate, and your filing deadline is looming. Include a credit note request clause in your contracts and invoices: “WHT credit note to be issued within 30 days of payment.”

WHT on Payments to Non-Residents

Payments to non-resident companies or individuals for services, royalties, interest, dividends, rent, or management fees attract WHT at rates generally set at 10% — unless a Double Taxation Agreement (DTA) between Nigeria and the recipient’s country specifies a lower rate.

How DTAs Affect WHT Rates

Nigeria has DTAs with approximately 15 countries. These treaties often reduce the WHT rate on specific payment types — typically to 7.5% or 12.5% for dividends, and 7.5% or 10% for interest and royalties, depending on the specific DTA. To apply the reduced rate, the payer must confirm the recipient’s tax residency in the treaty country and retain documentation (a certificate of tax residency from the recipient’s tax authority) to support the reduced rate.

If no DTA exists, the domestic WHT rate of 10% applies. If a DTA exists but the payer cannot verify the recipient’s residency, the safest approach is to deduct at the domestic rate and allow the recipient to claim a refund or credit through the DTA mechanism.

Worked Example: Payment to a Non-Resident

TechStar Nigeria Ltd pays £200,000 (approximately ₦400,000,000 at the prevailing CBN rate) in software licence fees to SoftCorp UK Ltd. Nigeria has a DTA with the UK. The DTA rate on royalties is 12.5%.

TechStar remits ₦50,000,000 to the NRS and issues a credit note to SoftCorp. Without the DTA, the WHT would have been ₦40,000,000 at 10% — wait, that is lower. In this case, the DTA rate (12.5%) is actually higher than the domestic rate (10%), so the domestic rate of 10% applies as the effective cap. The payer deducts whichever is lower: the domestic rate or the treaty rate. TechStar deducts ₦40,000,000 (10% domestic rate) and remits accordingly.

DTA interactions require careful analysis. Always compare the domestic rate against the treaty rate and apply the lower one. When in doubt, consult a tax professional — the amounts involved in non-resident WHT are typically large enough to justify the advisory cost.

What Happens to WHT Credits

WHT is not a final tax for most payment types (dividends and interest to individuals are exceptions where WHT is typically the final tax). For all other payments — contracts, rent, professional fees — the WHT is an advance payment of income tax. Here is how the credit flows through to the payee’s annual return:

1. The payee receives the net payment and the WHT credit note during the year
2. The payee includes the gross income (full invoice amount, before WHT deduction) in their annual tax return
3. The payee computes their total tax liability using the NTA 2025 tax bands (for individuals) or CIT rate (for companies)
4. The payee offsets the total WHT credits (from all credit notes received during the year) against their computed tax liability
5. The payee pays only the difference — tax liability minus WHT credits = tax payable

If WHT Credits Exceed Tax Liability

This happens when a taxpayer has significant deductions (business expenses, capital allowances, pension) that bring their taxable income down, while WHT was deducted on the gross payments received. The WHT credits exceed the computed tax — the taxpayer has overpaid.

The excess credit can be carried forward to offset against the following year’s tax liability. In theory, the taxpayer can also request a cash refund from the NRS or State IRS — but in practice, refunds take considerable time and effort. Most taxpayers carry the credit forward as a practical matter.

Penalties for WHT Non-Compliance

The 40% Non-Deduction Penalty

This is the penalty that catches businesses off guard. If you pay a ₦10,000,000 consulting invoice to a company without deducting 10% WHT, the penalty is 40% of the undeducted amount — 40% of ₦1,000,000 = ₦400,000. You still owe the ₦1,000,000 in WHT (which you must now pay out of your own funds, since the consultant has already received the full amount), plus the ₦400,000 penalty. Total exposure: ₦1,400,000 — on a single invoice.

The penalty applies regardless of the reason for non-deduction. Whether you did not know about the obligation, forgot, or the payee pressured you not to deduct — the penalty falls on the payer. This is why WHT deduction must be treated as a non-negotiable step in every payment process.

Common WHT Errors and How to Avoid Them

• Deducting at the wrong rate. Consulting fee to a company = 10%. Consulting fee to an individual = 5%. Supply contract = 5%. Rent = 10%. Confusing these rates — applying 5% to a company consulting fee, or 10% to a supply contract — creates either an under-deduction (penalty for you) or an over-deduction (cash flow problem for the payee). Keep a rate card posted in your accounts department.
• Calculating WHT on the VAT-inclusive amount. WHT is calculated on the net amount — before VAT. If an invoice shows ₦5,000,000 net plus ₦375,000 VAT = ₦5,375,000 gross, the WHT is 10% of ₦5,000,000 = ₦500,000 — not 10% of ₦5,375,000 = ₦537,500. Computing WHT on the gross inflates the deduction by ₦37,500 and shortchanges the payee.
• Not deducting because the payee objects. Some suppliers, landlords, and consultants resist WHT deduction, insisting on full payment. Your legal obligation is to deduct. Paying the full amount without deducting exposes you to a 40% penalty. The payee’s objection does not override the law. Explain, document, deduct.
• Deducting but not remitting. Deducting WHT from a payment and keeping it instead of remitting to the NRS is treated as seriously as failing to deduct — with the added dimension that you are holding money that belongs to the government. The penalty is the full amount plus 10% per annum plus CBN rate interest. In severe cases, criminal prosecution is possible.
• Not issuing credit notes. Every WHT deduction requires a credit note to the payee. Without it, the payee cannot claim the credit and is effectively taxed twice. Set up a process: deduct → remit → issue credit note, as a single workflow. No credit note = incomplete process.
• Issuing credit notes without remitting. Some businesses issue credit notes to their suppliers (keeping the supplier happy) but fail to remit the WHT to the NRS. The supplier files their return and claims the credit. The NRS cross-references and finds no corresponding remittance. Both the payer and the payee face exposure — the payer for non-remittance, and the payee for claiming a credit that was never paid.
• Missing the 21st deadline. WHT remittance is due by the 21st of the following month — the same deadline as VAT. If you process payments on the 25th of the month, the WHT from those payments is due by the 21st of the next month. If you process payments on the 1st, the WHT is also due by the 21st of the next month. Track the deduction date, not the payment processing date, to determine which month’s return each deduction belongs to.

Setting Up a WHT Compliance Process

1. Classify every payment. Before processing any payment to a supplier, contractor, landlord, or service provider, determine: is WHT applicable? If yes, what rate? Document the classification on the payment voucher or in your accounting system.
2. Deduct at the point of payment. Configure your payment process so that WHT is deducted automatically when the payment is approved — not as a separate step that can be forgotten. Accounting software can automate this; manual systems need a checklist.
3. Maintain a monthly WHT register. A spreadsheet or ledger recording every WHT deduction: date, payee name, payee TIN, payment type, gross amount, WHT rate, WHT amount, and credit note issued (yes/no). This register feeds directly into your monthly WHT return.
4. Remit by the 15th. Give yourself six days before the 21st deadline. Process the NRS portal filing and payment by the 15th at the latest. Portal delays, payment processing times, and public holidays eat into the window — build in buffer.
5. Issue credit notes within 7 days of remittance. Once the WHT is remitted and you have the NRS acknowledgement, generate the credit notes and send them to each payee. Do not batch credit notes quarterly or annually — issue them monthly alongside the remittance.
6. Reconcile monthly. At month-end, reconcile total WHT deducted (from your register) against total WHT remitted (from your NRS payment receipts). Any discrepancy — even ₦1,000 — should be investigated immediately.

Final Thoughts

WHT is a tax collection mechanism, not an additional tax. For the payer, it is an administrative obligation — deduct the right rate from the right base, remit by the 21st, issue the credit note. For the payee, it is an advance payment — money already paid towards their annual tax bill, recoverable through the credit note. The system works when both sides execute their roles: the payer deducts and remits, the payee collects the credit note and claims it.

The system breaks when payers do not deduct (40% penalty), deduct but do not remit (principal plus 10% plus interest), or remit but do not issue credit notes (payee taxed twice). It also breaks when payees do not collect credit notes (lost credits worth 5–10% of every payment received) or do not claim them on their annual return (overpayment of tax). Every breakdown has a measurable cost — and every cost is avoidable with a disciplined monthly process.

Verify your WHT computations with our Tax Calculators. Ask a specific WHT question to the AI Tax Assistant. For complex WHT situations — non-resident payments, DTA rate applications, or NRS audit queries — connect with a specialist through the Tax Professional Directory. For the NRS filing portal, visit selfservice.nrs.gov.ng.

FAQs About Withholding Tax in Nigeria

What is the WHT rate on consulting fees?

10% if paid to a company (limited liability company). 5% if paid to an individual (sole proprietor, freelancer). The rate depends on the legal status of the payee, not the nature of the work. The same consulting project attracts different WHT rates depending on whether the consultant invoices through a company or as an individual.

Is WHT calculated on the amount before or after VAT?

Before VAT. WHT is calculated on the net payment amount — the price of the goods or services before VAT is added. WHT and VAT are independent calculations on the same net base. Neither is computed on the other. On an invoice of ₦5,000,000 net plus ₦375,000 VAT, the WHT is a percentage of ₦5,000,000 — not ₦5,375,000.

What happens if I do not deduct WHT?

A penalty of 40% of the amount not deducted under NTAA Section 105. You also remain liable for the WHT itself — which you must pay from your own funds since the payee has already received the full amount. On a ₦10,000,000 payment where 10% WHT should have been deducted, the total exposure is ₦1,000,000 (WHT) + ₦400,000 (penalty) = ₦1,400,000.

When must WHT be remitted to the NRS?

By the 21st of the month following the month in which the deduction was made. WHT deducted in January must be remitted by 21 February. This is the same deadline as monthly VAT returns. Late remittance attracts the principal amount plus 10% per annum plus interest at the CBN Monetary Policy Rate.

How do I claim WHT credits on my tax return?

Collect the WHT credit note from each client or payer. Include your gross income (full invoice amount, before WHT) in your annual return. Compute your total tax liability. Offset the total WHT credits (from all credit notes) against the liability. Pay only the difference. If your WHT credits exceed your liability, the excess carries forward to the next year.

Do I deduct WHT on rent paid to my personal landlord?

If you are a company paying rent, you must deduct 10% WHT regardless of whether the landlord is a company or an individual. If you are an individual paying rent for your personal residence, you generally do not need to deduct WHT. If you are an individual paying rent for business premises in the course of your trade or profession, you should deduct WHT.

What is the WHT rate on payments to non-residents?

Generally 10% under domestic law. If Nigeria has a Double Taxation Agreement with the recipient’s country, the DTA may specify a lower rate for certain payment types (dividends, interest, royalties). The payer applies whichever rate is lower — the domestic rate or the DTA rate. To apply the DTA rate, retain a certificate of tax residency from the recipient. If uncertain, deduct at the domestic rate and let the recipient claim DTA relief.