Reconciling a client's withholding tax credits
How a firm reconciles a Nigerian client's withholding tax receivable in the books with the credits on the NRS portal before the return is approved.
By Achekam · · 5 min read · For Accountants & audit firms in Nigeria
The trial balance shows a healthy withholding tax receivable. It has grown every year, because each time a customer paid an invoice net of tax, the bookkeeper debited the difference to that account. The client expects every naira of it to come off this year's company income tax. Then the firm looks at the NRS portal, and the credits shown there come to noticeably less.
That gap is common, and it is never good news left until the week the return is due. Reconciling the receivable to the credits the NRS actually holds is one of the most useful things a firm can do on a Nigerian company file, and it is best done before the computation, not after.
What the portal shows
The NRS's company income tax page says returns are filed electronically through its Self Tax Portal, where taxpayers download the return forms, upload completed forms and pay through approved electronic channels. The same page says the portal shows the status of returns and lets taxpayers use their withholding tax credits.
The credits on the portal are therefore the starting point for what the client can use. The receivable in the books is the client's own record of what it believes was deducted. A reconciliation explains every difference between the two.
What payers' returns should show
A credit appears for the client only if the customer who deducted the tax reported and remitted it correctly. The NRS's withholding tax page sets out what that reporting involves: a person who deducts tax at source must file a return with evidence of remittance, showing for each payee the name and address, Tax ID, NIN or RC number, the nature of the transaction, the gross amount, the tax deducted and the calendar month the payment relates to. The NRS withholding tax page also explains who must deduct and the consequences of failing to deduct or remit.
That list is also a list of the ways a credit goes missing:
| Problem at the payer | What the client sees |
|---|---|
| Deducted but not remitted | Receivable in the books, no credit on the portal |
| Remitted under a wrong Tax ID or RC number | Credit sits against someone else |
| Wrong month reported | Credit appears in a different period |
| Gross amount or tax misstated | Credit differs from the receivable |
| No return filed at all | Nothing on the portal |
Most missing credits are fixed by the payer, not the NRS. The client's job, with the firm's help, is to identify which customer caused each gap and ask it to correct its return.
When the deduction is final, not a credit
Not every deduction becomes a credit. The NRS says tax deducted on a payment to a non-resident is the final tax, unless the income is liable to further tax because of a taxable presence in Nigeria. For a non-resident client earning Nigerian income without such a presence, there is nothing to set off against a return: the deduction settles the liability. For a non-resident with a taxable presence, the income is liable to further tax, and the firm should confirm from the law how the deductions are treated before closing the reconciliation.
Classify each receivable balance by the type of payment and payer before reconciling. A balance that represents final tax should not sit in the receivable at all.
Over-deductions that point to a refund
Sometimes the reconciliation finds the opposite problem: a customer deducted too much. The NRS's guidelines on tax refunds list, among the cases where a taxpayer is eligible for a refund, withholding tax remitted at rates higher than the statutory rates, alongside tax paid in excess of the amount due for the year and tax paid twice or in error.
Note each over-deduction separately in the working paper, with the transactions it relates to. Whether the client asks the customer to correct it or applies for a refund is a decision for the client, made with the firm's advice, and the evidence will be needed either way. The rates that should have applied are covered in withholding tax on professional fees.
Tracing the receivable from the ledger to the lead schedule
The reconciliation is only as good as the starting balance. In Achekam, a firm can upload the client's general ledger in the layout its accounting package exports, and Achekam adds it up into a trial balance and checks every printed account total against its own sum. Differences are named and never quietly fixed, so if the withholding tax receivable account does not add up to the figure the client's package printed, the firm knows before it starts reconciling.
Lead schedules are then built from the engagement's trial balance, with each figure traceable to its lines. The withholding tax receivable on the lead schedule can be followed back to the individual ledger entries: each customer receipt where tax was deducted. That transaction list is what the firm matches against the portal's credits.
A practical matching order:
- Group the ledger entries by customer and month.
- Group the portal credits the same way.
- Match exact amounts first, then near amounts that differ by rounding.
- List what remains on each side, with the likely reason from the table above.
- Classify any final-tax balances out of the receivable.
Adjusting before the return is approved
The reconciliation should change the return, not just sit beside it. Where a receivable has no credit and the client cannot obtain one, the balance is not available to reduce the tax due, and the firm should say so plainly.
On the audit or review file, staff can record an adjustment on the relevant line of the lead schedule with a reason, for example writing off a balance the payer will never correct, or reclassifying final tax. For the return, staff open the client's Nigerian tax profile in Achekam's Revenue Service Centre and prepare the return there, with review and approval by different people. The reviewer should see the reconciliation before approving: credits claimed on the return should not exceed what the portal shows. How credits are then applied is the subject of using withholding tax credits.
A year-end reconciliation finds problems too late for most customers to fix them before the return is due. For larger clients, run the same matching quarterly, send each customer a short schedule of deductions that are missing from the portal, and keep the replies on file.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
