Deducting withholding tax from Nigerian suppliers
The withholding tax a Nigerian business deducts from consultants and goods suppliers, where the rates come from, and paying the net amount.
By Achekam · · 4 min read · For Running a business businesses in Nigeria
Withholding tax turns a business into a tax collector. When a Nigerian company pays a consultant, an IT contractor or a distributor, the law expects it to keep back part of the payment, hand that part to the tax authority, and pay the supplier the rest. The supplier later uses the deduction as a credit against its own tax.
Done properly, it is routine. Done badly, it produces two unhappy parties: a supplier chasing a "short payment" it does not understand, and a tax authority chasing a deduction you never made. This article covers the rates that apply to supplier payments, where they come from, and how to handle the net payment in practice.
Commission, consultancy, technical, management and professional fees
The most common deduction for an ordinary business is on fees for services. Nigerian withholding tax on commission, consultancy, technical, management and professional fees is:
| Payee | Rate at the time of writing |
|---|---|
| Resident | 5% |
| Non-resident | 10% |
That covers a wide range of everyday suppliers: the audit and accounting firm, the lawyer, the IT support company, the management consultant, the sales agent paid on commission. If the invoice is for advice, expertise, management or a commission, assume withholding applies until you have confirmed otherwise.
Goods bought from a supplier who is not the manufacturer
Buying goods brings a different rate. Payments to resident suppliers of goods who are not the manufacturer attract withholding tax of 2%.
The distinction is practical. If you buy office chairs directly from the factory that makes them, this rule does not catch the payment. If you buy the same chairs from a dealer or distributor, it does. Record on each supplier's file whether they manufacture what they sell to you, so the decision is made once and not guessed at every payment run.
Rent, dividends, interest, royalties and directors' fees each carry their own rates; those are covered in withholding tax on rent, dividends and interest.
Resident and non-resident payees
Residence changes the rate for service fees, so know which you are dealing with before you pay. A foreign software consultancy invoicing your Lagos company from abroad is a non-resident payee, and the fee rate doubles from 5% to 10%. A local branch or subsidiary of a foreign group may be resident.
Ask new suppliers to confirm their residence and Tax ID when you set them up, and keep that confirmation with their details. A wrong assumption here means the wrong deduction on every invoice they send.
Where the rates come from: the 2024 Regulations
It is easy to assume that withholding rates sit in the Nigeria Tax Act 2025, which took effect on 1 January 2026. They do not. They come from the Deduction of Tax at Source (Withholding) Regulations 2024, which the Nigeria Tax Administration Act 2025 keeps in force under section 146(c).
That matters when you read commentary. Older guides quote rates from regulations that the 2024 Regulations replaced, and some tables online have not caught up. PwC keeps a summary of Nigerian corporate withholding tax rates by type of payment, which is a convenient cross-check; confirm anything unusual against the Regulations themselves or with your adviser, since rates change and exemptions apply to some transactions.
Paying the supplier the net amount
Take a worked example in words. A resident consulting firm sends you an invoice for its monthly fee. You deduct 5% of the amount on which withholding is due, pay the supplier the rest, and owe the deducted 5% to the tax authority by the 21st of the following month. Confirm with your adviser how VAT on the invoice is treated in that base, and apply the same treatment every time.
In Achekam, record the supplier's bill line by line with its VAT as usual. A bill can be paid in full or in parts from a chosen bank account, so the payment you make to the supplier is the net amount. Agree with your accountant how the withheld part is recorded, so that the supplier's balance clears and your books show the amount you now owe the tax authority. A bill entered without a purchase order waits for approval before it posts, which is a good moment for the approver to check that the supplier's withholding rate is noted on the file.
Tell the supplier what you withheld when you pay. A remittance advice that shows the invoice amount, the deduction, the rate and the net payment answers the "why was I short-paid?" call before it happens.
What Achekam computes once its rules are approved
Achekam's Revenue Service Centre is built to compute Nigerian withholding tax, alongside company income tax, VAT, capital gains and stamp duty, once its rules are approved. Every Nigerian tax figure in Achekam's rule book was loaded "under review", and nothing is computed from a figure until an Achekam platform administrator approves it.
Until those rules are approved for your workspace, treat the rates in this article, confirmed with your adviser, as your working figures, and keep your own schedule of deductions by supplier and month.
A checklist for each supplier payment run
- Is the payment for services, goods, or something with its own rate?
- Is the supplier resident or non-resident?
- For goods, is the supplier the manufacturer?
- Has the deduction been worked out on the right base?
- Has the supplier been told what was withheld?
- Is the deduction on the schedule for remittance by the 21st?
The other side of the transaction, when your customers withhold from you, is covered in being paid net of withholding tax, and the deadline and penalties for passing deductions on are in remitting Nigerian withholding tax on time. Go through your supplier list this week and mark each one with its rate.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
