A Nigerian SME meets several withholding tax rates in a single month: one for goods, another for services, another again for a contractor.
Here is where the common ones sit.
The rates side by side
| Payment type | Rate |
|---|---|
| Supply of goods (resident) | 2% |
| Other services (resident) | 2% |
| Construction contracts (resident) | 2% |
| Professional fees (resident) | 5% |
| Professional fees (non-resident provider) | 10% |
All of these sit under the Deduction of Tax at Source (Withholding) Regulations 2024.
Why goods and general services sit at the same low rate
Supplying goods and providing a general service are both taxed at 2% for a resident recipient. That is one of the lower rates in the system. It reflects how routine these transactions are.
There is an exception worth knowing. Goods supplied by their own manufacturer or producer are exempt. A factory selling its own output is not caught the way a reseller is.
Professional fees sit higher, and higher again for a non-resident
Professional fees are taxed at 5% for a resident provider. That is well above the goods and services rate. A lawyer, accountant or consultant sits in this category.
Where the provider is a non-resident company, the rate rises to 10%. This deduction is that company's final Nigerian tax on the fee.
Construction sits in its own category
A construction contract is taxed at 2% for a resident contractor, and 5% where the contractor is not resident in Nigeria. A related but separate category, other construction and related activities, carries its own rates: 5% for a resident and 10% for a non-resident. Check which category a contract falls under before applying a rate.
The double rate for a missing Tax ID
A supplier without a valid Tax ID on file is not charged the normal rate at all. Instead, the deduction is twice the normal rate.
That is a direct reason to collect a Tax ID from every supplier before the first payment. It beats chasing the paperwork later.
A quick example
Take a business paying a resident IT consultant ₦300,000 for a one-off project, for example. It deducts 5% as professional fees WHT. That is the professional fees rate, not the lower goods-and-services one, because consulting sits under professional fees.
Common mistakes
- Using one flat WHT rate for every supplier. Goods, services, professional fees and construction each carry their own rate.
- Forgetting the own-manufacturer exemption on goods. Not every goods transaction is deducted from.
- Paying a supplier in full because they have not sent a Tax ID yet. That is exactly when the higher no-Tax ID rate should apply instead.
For rent, dividends and directors' fees, which follow their own separate rates, see our pieces on WHT on rent, WHT on dividends and WHT on directors' fees. For when a small transaction may need no deduction at all, read the WHT exemption for small businesses, and browse the hub on the Nigeria Revenue Service (NRS), formerly FIRS, and Rev360 for more.