Withholding tax on a firm's fees in Nigeria
How much withholding tax Nigerian clients deduct from professional fees, which instrument sets the rate, and how the firm should account for it.
By Achekam · · 4 min read · For Accountants & audit firms in Nigeria
A Nigerian firm's debtors list often carries a curious tail of small balances: a few percent of each fee, left unpaid on invoice after invoice. They are rarely bad debts. They are withholding tax, deducted by clients at source and paid to the tax authority on the firm's behalf.
Left on the debtors list, those balances are written off sooner or later, and the firm loses a credit it was entitled to. Treated properly, they reduce the firm's own tax bill. This article covers the rates on professional fees, the instrument that sets them, how to record a receipt paid net, the evidence the firm needs to claim the credit, and the client's own obligations.
Rates for residents and non-residents
At the time of writing, Nigerian withholding tax on commission, consultancy, technical, management and professional fees is 5% for resident recipients and 10% for non-residents. Accounting, audit, tax and advisory fees are professional fees, so a client paying a Nigerian firm ordinarily deducts 5% of the fee.
The non-resident rate matters to firms that bill through, or alongside, a foreign member firm or affiliate. Where the invoice comes from a non-resident entity, the client deducts at the higher rate.
Disputes over the rate are usually about the nature of the service, not the rate itself. A firm that supplies software licences, training or outsourced staff alongside its professional work may find clients treating parts of an invoice differently. Separate those lines on the invoice, describe each one plainly, and agree the treatment with the client's finance team before the first payment, so the deduction matches what the firm expects.
Which instrument sets the rates
A point that catches people out: these rates do not come from the Nigeria Tax Act 2025. They come from the Deduction of Tax at Source (Withholding) Regulations 2024, which the Nigeria Tax Administration Act 2025 keeps in force.
That matters when reading the new legislation. A practitioner searching the Nigeria Tax Act for withholding rates will not find them there, and may wrongly conclude they have changed or lapsed. Point clients and staff to the Regulations. The NRS page on withholding tax explains who must deduct tax at source, what the withholding return must show for each payee, which transactions are exempt, and the consequences of failing to deduct or remit.
Receipts paid net of withholding
Take an example in words. The firm invoices a corporate client for a tax advisory engagement. The client pays the fee less 5% and remits the 5% to the NRS. The bank statement shows the net amount.
The firm has received two things: cash, and a tax credit. Both settle the invoice.
The firm's client invoices, receipts, credit notes and statements of account sit in a receivables ledger on Achekam's server. One limit applies: when a customer pays net of withholding tax, Achekam's receipt screens cannot settle the withheld part of the invoice. The net cash can be recorded, but the withheld amount stays open on the invoice.
Handle it deliberately:
- Record the net receipt against the invoice.
- Add the withheld amount to a schedule: client, invoice, amount and date of payment.
- Clear it in the firm's ledger to a withholding tax receivable, not to discounts, bad debts or fee write-offs.
- Match it to the evidence of remittance when that arrives.
Credit notes and tax credits
Two different documents share a confusing name in Nigerian practice. A commercial credit note reduces a fee: it tells the client it owes less. The evidence that tax was withheld and remitted on the firm's behalf, often referred to as a withholding tax credit note, is something else entirely: it is the firm's proof for claiming the credit.
Never issue a commercial credit note to clear withheld tax from an invoice. It misstates the fee, it confuses the client's records, and it leaves the firm without the evidence it needs. Instead, collect the evidence of remittance for each amount on the schedule, and check what form that evidence now takes under the NRS's current systems.
When the firm prepares its own company income tax return, withholding tax suffered and evidenced is ordinarily set against the tax due. Once its rules are approved, Achekam's Revenue Service Centre computes Nigerian company income tax and withholding tax, among other taxes. Every Nigerian tax figure in its rule book was seeded "under review", however, and nothing is computed from a figure until an Achekam platform administrator approves it.
Remittance deadlines and penalties for the client
The client carries the obligation to remit. Withholding tax not remitted to the NRS by the 21st of the following month attracts 10% a year plus interest, and failing to deduct it at all attracts a 40% penalty. State revenue service remittance dates are uncertain in the research, so check them separately for State taxes.
The firm has an interest in the client getting this right: if the client deducts but never remits, the firm has a short payment and no credit. Raise it early with any client whose evidence of remittance does not arrive.
Rates on other kinds of payment, such as dividends, rent and goods, are covered in Nigerian withholding on dividends, rent and goods. The company income tax the credit is set against is explained in Nigerian company income tax from 2026, and the penalties in more detail in penalties for late Nigerian returns and payments.
A month-end habit
At each month end, list every fee received short, confirm the rate used, and move the withheld amounts to the receivable. Chase evidence of remittance for anything older than the client's remittance date, and carry the evidenced total into the firm's tax working papers.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
