Most withholding tax (WHT) guides are written for the business that gets paid less. This one is for the other side of the deal: the business that pays.
If your company pays a consultant, a contractor, a landlord or a supplier, the law can make you the tax collector. You take a slice of the payment, send it to the tax authority, and give the supplier a receipt. Skip the first step and the penalty is 40% of the tax you should have taken, even though that money never sat in your account.
Picture Tunde, who runs a logistics company in Ibadan with a turnover of about ₦180 million a year. In one month his company pays three suppliers. We will follow those three payments from the invoice to the receipt.
WHT is an advance payment of the supplier's income tax. The duty to collect it sits with the payer. If your business is a company, or you pay a supplier in the course of running a business, assume the duty applies to you.
The rate depends on what you are paying for and who you are paying. The full table is in our WHT rates guide. The ones MSME owners meet most often:
The rule that catches payers out: if the supplier cannot give you a Tax Identification Number (TIN), the rate on fees, services and goods doubles. Ask for the TIN before you pay, not after.
The Deduction of Tax at Source (Withholding) Regulations 2024 let a small company skip the deduction where the supplier has a valid TIN and that month's payments to that supplier total ₦2,000,000 or less. For this exemption the Regulations describe a small company as one with turnover of ₦25 million or less a year. That is much lower than the Nigeria Tax Act test for income tax (₦100 million turnover and ₦250 million fixed assets). Tunde's company turns over ₦180 million, so the exemption does not help him. If your turnover is close to ₦25 million, confirm your position with a tax adviser before you stop deducting.
WHT is charged on the payment before Value Added Tax (VAT). If the invoice includes VAT, take the VAT out first, then apply the rate. You still pay the VAT in full to the supplier.
Here are Tunde's three payments for the month:
The tyre dealer's rate is doubled because it gave no TIN. Rent is passive income, so it is not doubled; the landlord pays 10% either way.
Tunde has deducted ₦177,000 in total. None of it is his money. He is holding it for the tax authorities.
A common mistake is to deduct WHT from the VAT-inclusive total. On the IT invoice that would mean deducting ₦26,875 instead of ₦25,000. The supplier would be short-paid, and the figures on the receipt would not match the rate in the Regulations.
Where the money goes depends on who the supplier is:
The Nigeria Tax Administration Act 2025 (NTAA) sets the deadline: the 21st day of the month after the month you deducted. The 2024 Regulations allow until the 30th for WHT deducted from individuals, but the Act's penalty for late remittance counts from the 21st. The simple rule: remit everything by the 21st.
So Tunde's deductions in March work out like this:
① ₦25,000 (IT consultancy) and ₦32,000 (tyre dealer) go to the NRS by 21 April.
② ₦120,000 (the landlord, who lives in Ibadan) goes to the Oyo State Internal Revenue Service by 21 April.
③ He keeps the payment reference for each one. He will need it for the receipt.
The Regulations also ask the payer to send a monthly schedule with the remittance. It lists each supplier you deducted from, with their name, address, TIN, what the payment was for, the gross amount, the rate and the tax deducted. Without it, the tax authority may not be able to link your payment to your suppliers' tax records. That is how a supplier ends up with a credit they cannot use.
Once you have remitted the tax, give each supplier a receipt. Regulation 8 of the 2024 Regulations requires it, and it is the supplier's evidence when they claim the WHT against their own income tax. Without it, your supplier pays the same tax twice.
The receipt should show:
Your supplier may also get a credit note from the NRS once your remittance is processed. That does not replace your receipt. Send the receipt anyway.
Two provisions of the Nigeria Tax Administration Act 2025 apply to payers:
Take Tunde's IT invoice. If he had paid the full ₦537,500 and deducted nothing, the penalty alone would be ₦10,000: 40% of the ₦25,000 he should have taken. He has no way to get that back from the consultant.
Late remittance is worse than it looks, because the money was never yours. A business that uses deducted WHT to cover a cash shortfall is spending someone else's tax. Section 107 also allows prosecution, with a possible prison term of up to three years on conviction.
WHT goes wrong when it is left to the end of the year. A short routine each month prevents most problems:
① Before paying an invoice: check the supplier's TIN and the category of the payment. Work out the WHT on the amount before VAT.
② On the payment date: pay the supplier the net amount and record the deduction.
③ By the 21st of next month: remit each month's WHT to the NRS or the state, with the schedule.
④ Once paid: send each supplier their receipt.
⑤ At month end: check that every deduction has a remittance date and a receipt. Anything without both is a penalty waiting to happen.
If you only pay a supplier once or twice a year, the routine is the same. Put the 21st in your calendar the day you pay.
Lucrive's WHT receipts page (Professional and Enterprise plans) follows the same three steps:
Lucrive does not pay the tax for you. It records what you tell it you paid, and keeps every deduction, remittance and receipt in one place.
To check a single payment first, use the free WHT calculator. It works out the rate and the deduction for any category, with or without a TIN.
Most MSMEs both pay and get paid. If your clients deduct WHT from your invoices, our complete WHT guide explains how to claim those deductions against your own income tax.
This is a guide, not tax advice. Confirm your position with a qualified tax practitioner.
Sources & further reading
Record your first deduction at lucrive.io.
People and businesses in our examples are illustrative, not real Lucrive customers. Figures are worked examples: confirm your own position with a qualified tax adviser.