Last updated: 7 July 2026. Facts checked against current Nigerian regulation at time of update.
Withholding Tax for Contractors Nigeria 2026: Complete Guide
A consultant sends you a ₦2,000,000 invoice. Do you pay the full amount or deduct something first?
You deduct withholding tax on contractors in Nigeria before payment. This guide shows you the exact rates, the math, and what happens if you get it wrong.
Quick Answer
Deduct withholding tax (WHT) from the invoice, pay the contractor the net amount, and send the deducted amount to FIRS by the 21st of the following month. For most consulting and professional services, the rate is 5%. Get it wrong and face fines up to ₦5,000,000.
What You Will Need
Before you start:
- Contractor’s TIN (Tax Identification Number)
- Signed service agreement or contract
- FIRS remittance portal access (https://taxpromax.firs.gov.ng)
- WHT certificate template
Time: About 30 minutes per payment cycle plus monthly remittance
Setup cost: ₦5,000 – ₦15,000 for one-time professional guidance
Understanding Withholding Tax for Contractors in Nigeria
WHT is a prepayment of income tax. You are not keeping the money. You collect it from the contractor’s payment and pass it to FIRS on their behalf.
Think of it this way: FIRS cannot chase every freelancer and consultant in Nigeria. So they put the collection obligation on the business making the payment. That business is you.
Key distinction: Contractors attract flat WHT rates. Employees attract progressive PAYE rates. PAYE bands under the NTA 2025 range from 0% to 25%. WHT rates do not follow those bands. Keep the two completely separate.
WHT Rates Under NTA 2025
The rate table under NTA 2025 varies by service category. For clearly professional and consulting services, the default is 10%. When a specific service category is not listed, verify the current FIRS rate rather than guessing.
The rates in the original post below reflect the current FIRS guidance in force. Confirm each category applies before deducting.
| Service Type | WHT Rate | Example |
|---|---|---|
| Professional / Technical / Consultancy | 5% | Legal, IT, marketing |
| Rent (commercial property) | 10% | Office rent, warehouse |
| Dividends | 10% | Shareholder distributions |
| Interest on loans or deposits | 10% | Bank interest, loan payments |
| Construction (with materials) | 5% | Building, renovation |
| Construction (labour only) | 2.5% | Labour-only contracts |
| Transportation services | 5% | Logistics, haulage |
Note on supply of goods: The original post listed 2% for supply of goods.
The consultancy rate catches most businesses because your web developer, accountant, and marketing agency all fall here.
Step 1: Confirm the Worker Is Actually a Contractor
Before you deduct anything, make sure the person is a contractor. If they are really an employee, the right deduction is PAYE, not WHT.
Treat them as a contractor if they:
- Invoice you for completed projects or milestones
- Set their own hours and work from their own location most days
- Use their own equipment
- Have other clients besides you
Treat them as an employee if they:
- Work regular hours that you set
- Use your equipment and workspace daily
- Receive a fixed monthly salary
- Work only for your business
Gray area example: A graphic designer who works three days a week in your office on your computer but invoices monthly. Safe call? Treat them as an employee and deduct PAYE. The Nigeria Tax Act 2025 governs PAYE effective 1 January 2026, and FIRS will look at the day-to-day reality, not just what your contract says.
Step 2: Verify the Contractor’s TIN
Every contractor must give you their Tax Identification Number before you process payment. No TIN, no payment.
How to verify:
1. Visit the FIRS TIN verification portal
2. Enter the contractor’s TIN
3. Confirm the business name matches your records
Common mistake: Accepting a TIN without verifying it. A wrong or expired TIN puts the compliance risk back on you.
Step 3: Calculate the WHT Amount
The formula is simple: Invoice Amount × WHT Rate = Amount to Deduct
Worked Example 1: Consultancy Invoice
Your marketing agency sends a ₦2,000,000 invoice.
| Invoice amount | ₦2,000,000 |
|---|---|
| WHT rate (professional services) | 5% |
| WHT deduction | ₦100,000 |
| Amount you pay the agency | ₦1,900,000 |
| Amount you send to FIRS | ₦100,000 |
The agency is not losing ₦100,000 forever. They get credit for it when they file their annual income tax return, so it reduces what they owe FIRS at year-end.
Worked Example 2: Office Rent
Your monthly office rent is ₦500,000.
| Monthly rent | ₦500,000 |
|---|---|
| WHT rate (commercial rent) | 10% |
| WHT deduction | ₦50,000 |
| Amount you pay the landlord | ₦450,000 |
| Amount you send to FIRS | ₦50,000 |
Most business owners remember WHT on consultants but forget it applies to rent too. The landlord gets credit for the ₦50,000 at their own tax filing time.
[IMAGE: Simple two-column graphic showing the split between contractor payment and FIRS remittance for both examples above]
Step 4: Pay the Contractor and Issue a WHT Certificate
After deducting WHT, you have two jobs:
1. Pay the contractor the net amount (invoice minus WHT)
2. Issue a WHT certificate so they can claim the tax credit
A valid WHT certificate must show:
- Your company details and TIN
- Contractor’s details and TIN
- Service description
- Gross amount, WHT rate, and WHT amount
- Net amount paid and payment date
Pro tip: Issue the certificate the same day as payment. Contractors need it for their own filings, and delays create friction you do not need.
Step 5: Remit WHT to FIRS
Deadline: 21st of the month following the month of payment.
| Payment month | Remittance deadline |
|---|---|
| January | 21 February |
| February | 21 March |
| March | 21 April |
How to remit:
1. Log into the FIRS TaxPro-Max portal
2. Generate your WHT remittance advice
3. Pay via bank transfer or the online payment option
4. Upload payment evidence and your WHT schedule
5. Print the acknowledgment receipt
Common mistake: Batching up months of WHT and remitting once. Each month has its own deadline. Late remittance attracts a 10% penalty on the amount due.
Cost Breakdown
| Item | Cost | Notes |
|---|---|---|
| FIRS WHT remittance | ₦0 | Government service, no fee |
| Bank transfer charges | ₦50 – ₦500 | Varies by bank and amount |
| WHT certificate printing | ₦100 – ₦500 | Per contractor, per payment |
| Professional setup guidance | ₦5,000 – ₦15,000 | One-time cost |
| Typical monthly cost (5-10 contractors) | ₦500 – ₦2,000 |
Lint’s Smart Payroll covers PAYE computation, pension, NHF, payslip, and remittance for ₦500 per user. For contractor WHT specifically, Lint also handles WHT auto-deduction and remittance on contractor payments as a live feature.
Common WHT Mistakes Nigerian Business Owners Make
1. Using PAYE rates instead of WHT rates
PAYE is progressive (0% to 25%). WHT is a flat rate by service category. Do not mix them.
2. Forgetting WHT on rent
Commercial rent attracts 10% WHT. Many business owners pay rent in full without deducting anything. That is non-compliance.
3. Late remittance
The deadline is the 21st, not month-end. Set a calendar reminder for the 15th so bank processing does not push you past the cutoff.
4. Not issuing WHT certificates
You deducted the money. Now give the contractor their paperwork. Without the certificate, they cannot claim the credit at year-end. You create a problem for them and a paper-trail gap for you.
5. One rate for mixed invoices
A contractor who provides both consultancy and supplies equipment in one invoice gets two different rates applied. Split the invoice by component before deducting.
Penalties for Getting This Wrong
These are not theoretical. FIRS has been increasing enforcement.
| Breach | Penalty |
|---|---|
| Failure to deduct WHT | Fine up to ₦5,000,000 |
| Late remittance | 10% of the WHT amount plus daily interest |
| Wrong rate applied | Difference between correct and applied amount, plus 10% penalty |
Real scenario: You pay a consultant ₦5,000,000 without deducting WHT. FIRS can fine you up to ₦5,000,000 AND demand the ₦250,000 WHT you should have deducted. The fine alone exceeds the original WHT obligation.
Compliance here is not about being a good citizen. It is cheaper than the alternative.
WHT vs PAYE: The Quick Comparison
| WHT | PAYE | |
|---|---|---|
| Who it applies to | Contractors and vendors | Employees |
| Rate structure | Flat rate by service type | Progressive bands, 0% – 25% |
| Who remits | The business making payment | The employer |
| Deadline | 21st of following month | 10th of following month |
| Documentation | WHT certificate | Payslip |
How WHT Works for the Contractor
Contractors sometimes push back on WHT deductions. Here is how to explain it to them:
WHT is not an extra tax. It is an advance payment against their income tax for the year.
1. You deduct ₦100,000 from their ₦2,000,000 invoice
2. They receive ₦1,900,000
3. At year-end, they declare ₦2,000,000 as income
4. FIRS calculates what they owe in total income tax
5. They get a ₦100,000 credit for the WHT already paid
6. They pay only the difference, or get a refund if they overpaid
They are not worse off. They just paid part of their tax bill early.
Frequently Asked Questions
Do foreign contractors need WHT deductions?
Yes, usually at higher rates. They also need Tax Clearance Certificates for payments above ₦5,000,000.
What if a contractor does not have a TIN?
Do not pay them until they register. Help them get a TIN first at any FIRS office or through the FIRS TIN registration portal. Paying a contractor without a TIN is a violation.
Can I correct a wrong WHT deduction?
Yes, through FIRS amendment procedures. It typically takes 3 to 6 months. Getting it right the first time is faster and cheaper.
Does WHT apply to reimbursements?
No. Pure reimbursements for verified, documented business expenses do not attract WHT. But make sure you can show evidence they were actual out-of-pocket costs, not fees in disguise.
Do corporate contractors still get WHT deducted?
Yes. A company receiving payment for professional services still attracts WHT. Corporate status does not create an exemption.
What happens if I only partially paid the invoice?
WHT applies to each payment at the time you make it. Partial payments attract WHT on the amount paid, not the full invoice total.
How do I handle WHT on retainer agreements?
Deduct WHT on each monthly retainer payment at the applicable rate. Treat each payment as a separate transaction.
Related Tools and Resources
- FIRS TaxPro-Max Portal for WHT remittance
- FIRS TIN Verification
- Lint Smart Payroll for automated WHT deduction and remittance on contractor payments
Published: July 2026. Regulatory information is aligned with the Nigeria Tax Act 2025, effective 1 January 2026.
Reviewed by: [REVIEWER NAME PLACEHOLDER]
Official sources: Federal Inland Revenue Service (FIRS)
Sources
- NTA 2025
- NTA 2025 Sixth Schedule
Related on Lint
- Free PAYE Calculator (2026) — see take-home pay, tax and pension in seconds.
- Lint Payroll — run salary, PAYE, pension and salary advances in one funded run.
