When withholding is the final tax on payments abroad
When the withholding tax a Nigerian business deducts from a foreign supplier settles that supplier's Nigerian tax, when it does not, and who receives it.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
A Lagos company pays a consultancy in London for a strategy review, a software house in India for a licence, or a shareholder in Dubai a dividend. In each case Nigerian withholding tax is deducted before the money leaves. The foreign party then asks a fair question: is that the end of my Nigerian tax, or will I be asked for more?
For the Nigerian payer the answer matters too. It decides what you tell the supplier, which authority receives the tax, and what you keep on file in case the NRS asks why a payment abroad was handled the way it was. This guide explains the general rule, the exception, how the published rate tables treat non-residents, and how to record the payment.
The general rule: the deduction is the final tax
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. Its Withholding Tax page sets out that rule alongside who must deduct, what the return shows and which transactions are exempt.
For a foreign supplier with no taxable presence, then, the deduction does the whole job. It does not become a credit against a Nigerian return, because there is no Nigerian return to file. That is very different from the position of a Nigerian supplier, for whom tax withheld is a credit to use against its own tax.
The exception: a taxable presence in Nigeria
The rule stops being final where the income is liable to further tax because the non-resident has a taxable presence in Nigeria. In that case the withholding is not the end of the matter, and the foreign company may have Nigerian obligations of its own.
You are not expected to make that judgement alone, but you should notice the signs that call for a second look: a foreign firm whose staff work in Nigeria for long periods, one that runs its Nigerian work from a local base, or one that tells you it is registered for Nigerian tax. Ask the supplier, record its answer, and involve your adviser where the contract is large or long.
How the LIRS rate table treats non-residents
The Lagos State Internal Revenue Service publishes a rate table that sets separate columns for resident and non-resident recipients. At the time of writing it shows:
- Commission, consultancy, technical, management and professional fees: 5% for resident corporate and non-corporate suppliers, 10% for non-resident ones. The LIRS FAQ table remarks that the higher non-resident rate serves as final tax.
- Royalties: 10% when paid to corporate suppliers, resident or non-resident, and 5% when paid to non-corporate suppliers, resident or non-resident.
- Dividends and interest: 10% whether the recipient is corporate or not, resident or non-resident.
The table is undated and states no legal basis of its own, though the FAQ ties the rates to the Deduction at Source (Withholding) Tax Regulations 2024, the Nigeria Tax Act 2025 and the Nigeria Tax Administration Act 2025. Check the rate against the current regulations before applying it to a large payment. Dividends, interest and rent paid at home are covered in withholding tax on rent, dividends and interest.
Agree who bears the deduction
Foreign suppliers often price their work expecting to receive the full invoice amount. If the contract is silent, the first payment arrives short and the supplier disputes it. Settle the point when the contract is signed: either the price is subject to Nigerian withholding, or your business agrees to bear it and pays more. Whichever you choose, the deduction itself still has to be made and remitted.
Non-resident deductions go to the NRS
Which authority receives the tax is not a matter of where your office is. The LIRS FAQs say withholding tax deducted from payments to individuals and business names goes to the State revenue service of the State where the recipient lives, while tax deducted from payments to corporate entities, or to non-resident individuals and corporate entities, is payable to the Nigeria Revenue Service. A non-resident has no Nigerian State of residence, so every deduction from a payment abroad goes to the NRS, whether the recipient is a company or a person.
Recording the payment in Achekam
The foreign supplier's invoice is recorded as a bill for its full amount. Achekam takes supplier bills line by line, with VAT shown where it applies, and lets a bill be paid in full or in parts from the bank account you choose. To handle the deduction:
- Pay the supplier the amount net of withholding, recorded against the bill.
- Post a manual journal for the tax withheld, clearing that part of the supplier's balance to a withholding tax payable account. Achekam only accepts a balanced journal, refuses one dated in a closed month, and corrects a posted journal by reversal rather than editing it.
- Clear the payable account when the NRS remittance is made.
A foreign service usually raises a VAT question too, since the Nigerian buyer often has to account for the VAT itself; see VAT on services bought from abroad.
What to keep, for the supplier and for you
Keep a short file for every payment abroad:
- the contract and the invoice, showing the nature of the payment;
- the rate applied and where it came from;
- the supplier's statement on whether it has a taxable presence in Nigeria;
- the remittance to the NRS and its receipt; and
- a copy of the evidence sent to the supplier.
The supplier will want proof that the tax was paid in its name, and you will want proof that you applied the rule the NRS states. One file serves both.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
