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.

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

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