Nigeria Withholding Tax Calculator

About the Nigeria Withholding Tax Calculator

Work out the withholding tax (tax deducted at source) on a payment in Nigeria. Whoever makes a payment that the rules cover deducts tax at the rate in the regulations on deduction of tax at source and pays it to the tax authority; the payee is paid the rest and, unless it is the final tax, counts what was withheld towards its own income tax (Nigeria Tax Administration Act, section 51).

Choose what the payment is for: supplies of goods, other services, construction, directors' fees, brokerage, telecom tower services, gaming winnings and the payments that need no deduction come with the rates the Lagos State Internal Revenue Service gives for residents under the Deduction of Tax at Source (Withholding) Regulations, 2024. For any other payment, such as dividends, interest, rent, royalties, commission or professional fees, you enter the rate from the Regulations. The calculator doubles the rate when the payee has no Tax ID, applies the exemptions, grosses up a payment when you bear the tax and gives the deadline to remit. Nothing you type leaves your browser.

How withholding tax works

When a payment is made to a person, the payer deducts the tax at the rate in the regulations on deduction of tax at source, at the date the payment is made or settled (Nigeria Tax Administration Act, section 51). The payer issues a receipt for the deduction and remits the tax; for a resident payee it is usually an advance payment, counted against the payee's income tax for the year (a dividend taxed at source is the exception: it is not taxed again). The rates are in the Deduction of Tax at Source (Withholding) Regulations, 2024, made before the new Acts; regulations made under the repealed tax Acts stay in force where they agree with the Nigeria Tax Act (Nigeria Tax Act, section 198), and the Lagos State Internal Revenue Service still applies them alongside the two new Acts.

The rates in this calculator

For residents, the Lagos State Internal Revenue Service's notice on the 2024 Regulations.pdf) lists:

• directors' fees: 15%;
• construction of roads, bridges, buildings and power plants: 2%;
• any other construction and related activities: 5%;
• supply of goods other than by the manufacturer or producer: 2%;
• other supply or rendering of services: 2%;
• brokerage fees: 5%;
• fees for co-location and telecommunication tower services: 2%;
• winnings from gaming and reality shows: 5%, on net winnings: the gross winnings less the stakes and losses of the session before the payout (LIRS notice on winnings).

Other payments the Regulations cover, such as dividends, interest, rent and royalties (Nigeria Tax Administration Act, section 51(2)), have rates of their own in the Regulations, which the Nigeria Revenue Service publishes. The calculator does not guess them: choose Another payment and enter the rate. Enter it for a non-resident payee too, because the rates above are for residents.

Without a Tax ID

Every taxpayer needs a Tax ID. When the payee of a supply of goods or services, or of any other non-passive income, has none, the amount deducted is twice the rate: 4% instead of 2% on goods, 30% instead of 15% on directors' fees. Passive income such as dividends, interest and rent keeps its rate.

When nothing is deducted

• Exempt transactions in the Regulations, among them: across-the-counter purchases, goods manufactured or materials produced by the supplier, LPG, CNG, PMS, AGO and DPK, the commission a broker keeps from money collected for its principal in line with industry practice, telephone charges, internet data, airline tickets and insurance premiums.
• Small payers: a small business or an unincorporated entity need not deduct when the supplier has a valid Tax ID and the month's payments to that supplier are ₦2,000,000 or less.
• Exempt payees: the Presidential Fiscal Policy and Tax Reforms Committee lists small companies, manufacturers and agricultural businesses as exempt from withholding tax deduction on their income.

Final tax or a credit

For a non-resident, tax deducted from dividends, interest, rent, royalties, directors' fees and payments to entertainers and sportspersons is the final tax. A dividend taxed at source is franked investment income and is not taxed again, and an individual's interest on short-term securities and corporate bonds is not taxed further. A non-resident company's technical, consulting, professional or management services to a labelled startup bear 5%, which is its final tax (Nigeria Tax Administration Act, section 51(2), (3), (5) and (8)).

Tax withheld from a company's or a non-resident's income is administered by the Nigeria Revenue Service, and from a resident individual's by the Internal Revenue Service of the State where the individual lives (section 3).

Remitting and filing

Remit the tax deducted by the 21st day of the month after the month of the deduction, and render the monthly return. A payer who deducts and does not remit in time pays the tax, an administrative penalty of 10% a year of it and interest at the Central Bank of Nigeria's monetary policy rate (Nigeria Tax Administration Act, sections 28 and 107). Payments to service providers are made net of the tax, and a payer that does not deduct it faces penalties (LIRS notice.pdf)).

Limitations

• Preset rates are the resident rates the Lagos State Internal Revenue Service lists for the 2024 Regulations; every other rate, and every rate for a non-resident, is the one you enter. Check it in the Regulations.
• One payment at a time. Tax treaty rates, VAT and the split of an invoice into goods and services are not worked out.
• The exemptions are applied as the official notices describe them; the Regulations may attach further conditions, such as a valid Tax ID.
• The deadline is the remittance date; penalties and interest on late remittance are not worked out.
• An estimate from the official rules, not tax advice: the relevant tax authority decides what is due.

Privacy

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