A Practical Guide for Business
By Elabor Samuel
Moore Bishop & Rooks | Tax & People Services
Executive Overview
Nigeria’s Deduction of Tax at Source (Withholding Tax) Regulations, 2024, represents the most material overhaul of the country’s withholding tax (WHT) framework in decades. Effective for transactions from 1 January 2025, the regulations replace a regime that many businesses applied out of habit rather than legal alignment.
Yet, despite full effectivity, a key risk remains: organizations continue to apply legacy practices, exposing them to compliance risk, cash-flow inefficiencies, contractual disputes, and regulatory penalties.
This newsletter provides an integrated, practical overview of the new WHT regime, including the updated rate structure, exemptions, compliance obligations, offenses and penalties, and actionable next steps for business.
What Is Withholding Tax (WHT)?
Withholding tax is an advance tax collection mechanism that requires a payer (withholding agent) to deduct tax from certain payments and remit it to the relevant tax authority on behalf of the recipient. Amounts deducted generally constitute tax credits for recipients when filing income tax returns, except where WHT is treated as a final tax.
Historically, challenges under the old framework involved interpretation challenges, inconsistent application of rates, and weak execution. The 2024 regulations aim to clarify these areas and modernize treatment across sectors.
Compliance Reality: Law Has Changed, Habits Have Not
Despite the regulations being in force, many organizations continue to:
- Apply obsolete WHT rates;
- Deduct WHT based on invoice accrual rather than payment;
- Overlook new exemptions and small-business thresholds;
- Treat WHT as a routine accounting entry rather than a statutory obligation.
While long-standing habits are understandable, the law is judged by its current provisions, not by past practice. Tax authorities now assess compliance strictly by reference to the 2024 Regulations.
Updated Withholding Tax Rates
The table below summarizes the current WHT rates under the 2024 Regulations:
| Transaction Type | Resident Corporate | Non-Resident Corporate | Resident Individual | Non-Resident Individual | Remarks |
| Dividends | 10% | 10% | 10% | 10% | The dividend rate is now more reflective of the PAYE burden on individuals. |
| Interest | 10% | 10% | 10% | 10% | — |
| Royalties | 10% | 10% | 5% | 5% | Subject to treaty relief where applicable |
| Rent/Hire/Lease | 10% | 10% | 10% | 10% | — |
| Commission, Consultancy, Technical, Management & Professional Fees | 5% | 10% | 5% | 10% | Higher rates for non-residents may constitute a final tax. |
| Supply or Rendering of Services (other than listed) | 2% | 5% | 2% | 5% | Reduced rate to support low-margin services |
| Supply of Goods (non-manufacturer) | 2% | N/A | 2% | N/A | Encourages improved cash flow in trade |
| Co-location & Telecom Tower Services | 2% | 5% | 2% | 5% | Reflects industry margin realities |
| Construction – Roads, Bridges, Buildings, Power Plants | 2% | 5% | 2% | 5% | Reduced rate for major infrastructure categories |
| Other Construction Activities | 5% | 10% | 5% | 10% | Non-resident rate treated as final tax. |
| Brokerage Fees | 5% | 10% | 5% | 10% | — |
| Directors’ Fees | N/A | N/A | 15% | 20% | Rates aligned with marginal PIT bands |
| Compensation for Loss of Employment | N/A | N/A | 10% | 10% | Per Section 36 of the CGT Act |
| Entertainment & Sports Persons (in Nigeria) | N/A | 15% | N/A | 15% | Apply where income is earned in Nigeria. |
| Lottery, Gaming & Reality Show Winnings (excl. listed exemptions) | N/A | N/A | 5% | 15% | Effective from 1 Oct 2024 |
Expanded Exemptions and Clarifications
The regulations expand the scope of exemptions and clarify previously contentious areas, including:
- Small business exemption (as defined under the Nigeria Tax Administration Act, 2025), where:
- The vendor has a valid TIN, and
- Monthly transactions do not exceed ₦2 million.
In such cases, WHT is not required to be deducted.
This exemption, while beneficial, requires robust transaction monitoring to avoid under-deduction.
Persons Required to Deduct WHT
The following categories of persons are explicitly obligated to deduct withholding tax where applicable:
- Companies incorporated in Nigeria
- Government Ministries, Departments, and Agencies (MDAs)
- Statutory bodies
- Partnerships and enterprises
- Trustees
- Any person making payments that fall within the scope of WHT
The obligation arises at the point of payment or settlement, irrespective of accounting cut-off dates or accrual practices.
Mandatory Receipting of Deductions
A significant new requirement is that all WHT deductions must be receipted. Withholding agents must:
- Issue valid WHT receipts to all payees from whom tax is deducted; and
- Ensure receipts are sufficiently detailed to support tax credit claims by recipients.
Failure to issue valid receipts may impair recipients’ ability to claim tax credits and expose the withholding agent to compliance risk.
Offenses and Penalties
The regulations reinforce existing penalties and introduce clarity around offenses, which include:
- Failure to deduct tax at source where required
- Failure to remit deducted WHT within statutory timelines
- Failure to issue WHT receipts
- Incorrect, incomplete, or false disclosure of WHT information
Penalties may include interest, administrative fines, and potential prosecution, depending on the severity and recurrence of compliance breaches.
Timing and Remittance Requirements
Under the new regime:
- WHT must be deducted at the point of payment or settlement (not merely on accrual).
- Remittances must be made:
- FIRS: by the 21st day of the month following the deduction
- State IRS: by the 30th day of the month following the deduction
- Monthly WHT returns must be filed in the prescribed format along with remittances.
Organizations that continue to deduct solely on an accrual basis may already be technically non-compliant, despite eventual remittance.
Practical Impacts on Business
Cash Flow and Supply Chain
The reduction in WHT rates for the supply of goods and certain services (e.g., 2% on non-manufacturer goods) is expected to improve working capital cycles for businesses—especially in low-margin sectors.
Dividend Impact
Maintaining the 10% dividend rate, now more reflective of average PAYE burdens, improves comparability across income types and enhances investment planning certainty for both resident and nonresident shareholders.
Non-Resident Persons
For non-resident entities and individuals, WHT often constitutes the final tax on Nigerian-source income, eliminating the need for further Nigerian tax filings on that income. However, the applicability of Double Taxation Agreements (DTAs) may modify the rate where treaty relief is fully documented and available.
Emerging Risks and Common Compliance Gaps
From our engagements at Moore Bishop & Rooks, the most common risk areas include:
- Applying outdated WHT practices
- Over-/under-deducting due to poor classification
- Lack of valid TINs for vendors
- Failure to issue or retain valid receipts
- Contract terms that embed legacy assumptions
Given increased regulatory attention, legacy practices are now more likely to attract scrutiny during audits and compliance reviews.
What Businesses Should Be Doing Now
To move from reactive to proactive compliance:
- Update internal WHT matrices to reflect the 2024 regulations.
- Review contracts and pricing mechanisms for WHT implications.
- Validate vendor TINs and exemption eligibility.
- Train finance, procurement, and payroll teams on current obligations
- Strengthen documentation, receipting, and reconciliation processes
Our Perspective
The 2024 WHT Regulations are more than a technical update—they represent a shift toward payment-based, transparent, and defensible tax compliance.
Organizations that adapt early will benefit from improved operational certainty, reduced disputes, and stronger governance. Those that continue to rely on legacy habits risk falling behind the law.
At Moore Bishop & Rooks, we view this as an opportunity for businesses to enhance compliance and drive strategic tax outcomes.
Join the Conversation
Has your organization fully aligned its practices with the 2024 WHT Regulations—or are legacy practices still shaping decisions?
Follow this newsletter for continued insights into Nigeria’s evolving tax regime, and share your thoughts in the comments.
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