Not every payment a small business makes needs tax withheld from it first. A specific exemption removes the duty entirely below a set monthly value.
The threshold, and its one condition
A small business, or a similarly sized unincorporated entity, need not deduct withholding tax where a transaction with one supplier is worth ₦2 million or less in a calendar month.
The condition attached to it matters as much as the figure. The supplier must hold a valid Tax ID. Without one, the exemption does not apply, whatever the transaction value.
What happens once you cross the threshold
Go above ₦2 million with the same supplier in the same month, and the normal WHT rate for that category of payment applies to the full amount, not just the part above the threshold.
That makes the threshold a cliff edge rather than a slope. A transaction one naira above it is treated the same as one twice its size.
Which 'small' this actually means
This is where the exemption gets genuinely unclear. When the underlying Regulations were made, a small company for this purpose meant a business with a much smaller turnover than either figure used today, its own distinct definition from the same era.
The Nigeria Tax Act 2025 now defines a small company differently, at ₦50 million under the gazetted Act, or ₦100 million under the National Assembly's certified text (a separate dispute in its own right), for a completely different exemption covering company income tax, capital gains tax and the development levy.
Whether this WHT exemption now follows the newer, higher figure, or still sits on its own older definition, has not been confirmed. If your business sits between the two figures, do not assume either answer. Ask an accountant which definition your transaction should follow.
Why the exact wording matters
Sources also differ on whether the exemption covers a transaction worth exactly ₦2 million, or only one below that figure. The difference only matters for a transaction landing exactly on the line, but it is worth confirming rather than guessing if your numbers land there.
What to check before skipping a deduction
Before treating a payment as exempt, confirm two things: the transaction value for that supplier in that calendar month, and a valid Tax ID on file for them. Missing either one means the ordinary WHT rate applies.
Our piece on the common SME WHT rates sets out what those ordinary rates are once the exemption does not apply.
Common mistakes
- Adding up transactions across several suppliers to test the threshold. The exemption is tested per supplier, per month, not across your total spending.
- Skipping the deduction without a Tax ID on file. The exemption needs both conditions met together.
- Assuming the newer, higher small-company turnover figure applies here automatically. That connection has not been confirmed.
For the wider small-company position under the 2025 Acts, read the small-company tax exemption, and browse the hub on the Nigeria Revenue Service (NRS), formerly FIRS, and Rev360 for more.