VAT and withholding tax often sit on the same invoice, which is exactly why people mix them up.
Two different taxes that show up on one invoice
A single invoice for, say, professional services can carry both VAT and withholding tax, each calculated separately. VAT is charged on top of the fee. Withholding tax is deducted from it.
Confusing the two leads to real errors: charging the wrong amount, remitting the wrong tax to the wrong account, or assuming one covers the other when it does not.
Who actually bears each one
VAT is paid by the buyer, on top of the agreed price, and collected by the seller on the NRS's behalf. Withholding tax works the other way: the payer deducts it from what they owe the seller and remits it directly, so the seller receives a little less than the invoice total.
The rate picture: one flat, one that varies
7.5% is a single flat rate that applies broadly. Withholding tax varies by the type of payment: 5% on professional fees, 2% on the supply of goods, and 10% on rent, among other rates set under the Deduction of Tax at Source (Withholding) Regulations 2024.
That variation is the biggest practical difference. Getting the VAT rate wrong is rare; getting the withholding tax rate wrong, because it depends on what was actually supplied, happens far more often.
The deadline both share, and the return that differs
VAT is due by the 21st day of the following month, and withholding tax is generally due by the 21st day of the following month. The dates line up, but they are filed as separate returns, not one combined submission.
A short worked example
Say a consultant invoices a client ₦1,000,000 for professional services, purely as an illustration. VAT at 7.5% is added on top of that figure, while withholding tax at 5% is deducted from the ₦1,000,000 itself before payment goes out. The two adjustments move in opposite directions on the same invoice.
Why both taxes exist side by side
VAT is a consumption tax, aimed at spending. Withholding tax is a collection mechanism, aimed at making sure income tax gets paid gradually rather than in one lump sum at year end.
Neither one is a substitute for the other, and a business that pays both on the same transaction is not being taxed twice on the same thing. They tax different aspects of the same deal.
For the VAT side of that invoice, the VAT monthly return guide covers filing it, and our guide to VAT invoices and records covers what to keep on file for both taxes at once. Browse more NRS and Rev360 guides for the withholding tax side specifically.