A director does not receive a fee free of tax any more than an employee receives a salary free of PAYE. The company paying it deducts withholding tax first, and the director receives only the balance left after that deduction.
The rate for a resident director
Withholding tax on a director's fee is 15%, under the Deduction of Tax at Source (Withholding) Regulations 2024. This is the rate for a director based in Nigeria.
The higher rate for a non-resident director
A director who is not resident in Nigeria is taxed at a higher rate on the same kind of fee: 20%, against 15% for a resident director. That gap is worth confirming before you pay a director based abroad, since applying the resident rate by mistake under-deducts tax the company is still on the hook for.
What changed from the old rate
The current rate, 15%, has applied since these Regulations took effect on 1 Jan 2025. The rate on a director's fee was lower before then.
If you are working from an old contract, invoice template or accounting note that quotes the previous rate, update it.
Who deducts it, and when
The company paying the director's fee deducts the tax before payment, in the same way it would for any other withholding tax category. The deducted amount is remitted to the NRS separately, by the 21st day of the following month.
Keep a simple log of each fee paid and the amount deducted. It doubles as your proof if the NRS ever asks how a figure was worked out.
A quick example
A company paying a resident director a ₦500,000 fee for the year, for example, deducts 15% of that amount before payment, and remits the deducted sum to the NRS by the usual deadline.
Keeping the fee separate from salary
A director's fee and a director's salary are not the same payment, even when the same person receives both. A director who is also an employee has their salary taxed under PAYE instead, a different system with different bands. Our PAYE hub covers that side of the calculation.
Mixing the two up on a payslip or a board minute is a common source of under-deduction, since PAYE and WHT are worked out differently.
Common mistakes
- Using the pre-2025 rate from an old template. 15% is the current figure.
- Applying the resident rate to a non-resident director. The higher non-resident rate applies instead, even for a single board meeting attended from abroad.
- Confusing a director's fee with a director's salary. They sit under two different tax systems.
- Leaving no record of which rate applied. A board with both resident and non-resident directors should note the rate used for each fee.
For the rate on other common SME payments, see WHT rates on contracts, services and goods, and browse the NRS and Rev360 hub for more.