Learn about WHT obligations, rates, and how to manage it on your business invoices and expenses.
What is withholding tax
Withholding Tax (WHT) is a mechanism where the party making a payment deducts tax at source and remits it directly to FIRS on behalf of the recipient. It is not an extra tax. It is an advance payment of the recipient's income tax, which they can then claim as a credit when filing their annual returns.
WHT rates for common transactions
WHT rates vary by the nature of the transaction. For professional and management fees paid to a company, the rate is 10%. For dividends, it is 10%. For rent paid to a company, it is 10%. For construction contracts, it is 5%. For individuals receiving professional fees or rent, the rate is 5%. When in doubt, check the current FIRS schedule or consult a tax professional.
Who deducts WHT
The obligation to deduct WHT falls on the payer, not the recipient. If you are a company paying for professional services, you must deduct WHT before remitting the balance to your vendor. If you are the vendor, you should issue your invoice including the WHT amount and note that it is subject to deduction.
How to remit WHT
WHT deducted must be remitted to FIRS by the 21st of the following month. Along with remittance, you must issue a WHT Credit Note (or tax receipt) to the vendor. They use this credit note to offset their income tax liability. Failure to deduct and remit WHT attracts penalties and interest.
Handling WHT on your invoices
When raising invoices for professional services, it is good practice to show the WHT amount separately so both parties are clear on what will be deducted. For example: Service fee N100,000, WHT (10%) N10,000, Amount payable N90,000. Kuvra automatically applies WHT to applicable invoice line items so you always invoice correctly.
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