In June 2024, the Federal Ministry of Finance published a Deduction of Tax at Source (Withholding) Regulations 2024 (the Regulations) to establish the rules for the deduction/withholding of tax from payments to taxable persons. The Regulations are made under the provisions of the Companies Income Tax Act (CITA), Personal Income Tax Act (PITA), and Petroleum Profit Tax Act (PPTA) which empowers the Minister of Finance to make regulations for administering the deduction of tax at source and shall commence on 1st July 2024. Notably, withholding tax is an advance income tax deduction and not an additional/separate tax or cost on a contract.

At the inception/introduction of the WHT Regime in 1977, WHT was introduced to widen the tax net by capturing details of entities that were then engaged in business transactions, without formal tax registration. Thereby creating an inequitable and unfair system where persons who fail to pay taxes derive income and enjoy the benefits from taxes paid without paying their fair share of tax. The 2024 Regulations introduce measures and provisions that disincentivize this practice and create an equitable tax system that supports economic growth.

The Regime mandates that invoices issued by a business entity for goods sold or services rendered would be subjected to tax deduction when payment is made or the amount due is otherwise settled. In the case of a payment between related parties, the deductions shall be made at the time of payment or when the liability is recognized, whichever is earlier. However, except where the income is further liable to income tax because of the establishment of a taxable presence in Nigeria, the amount deducted on any payment to a non-resident person shall be the final tax. Subsequently, a tax credit note is then issued in favor of the tax deduction suffered, such that the taxpayer can then apply the Withholding Tax credit note against the final income tax payable when filing its income tax returns for the relevant year.

Persons Mandated to Withhold

The 2024 Regulations mandate the following persons to deduct tax at source on eligible transactions:

  • Body corporate or unincorporated, except individuals. This includes companies limited by shares, sole proprietorships, limited liability partnerships, joint ventures, non-governmental organizations, etc.
  • Government, Government Ministry, Department, or Agency at all levels.
  • Statutory bodies of Government
  • Public Authorities
  • Any other institution, organization, establishment, or enterprise including those exempt from tax.
  • Any person’s action as a payment agent on behalf of any of the above-listed persons.

Notably, the Regulations exempt small companies (i.e., companies with an annual turnover of N25,000,000.00 (approximately $16,000) and below), and unincorporated entities with the same turnover threshold, from the requirement to deduct tax at source provided the supplier is registered for tax and the transaction value is N2 million or less.

Eligible Transactions and Applicable Rate of Tax to be Withheld

The 2024 Regulations introduced a detailed table of rates and eligible transactions by both corporate and non-corporate recipients. Significantly, the Regulations consider the non-resident recipients of income from Nigeria and cover the field on the applicable rates for payments made to entertainers, sportspersons, winners of lotteries, gaming, and reality shows amongst others. The under-listed eligible transactions are subject to withholding tax at the following rates:

Transactions Corporate Recipients Non-Corporate Recipients
Resident Non-Resident Resident Non-Resident
Dividend, Interest 10% 10% 10% 10%
Royalty 10% 10% 5% 5%
Rent, Hire, or Lease 10% 10% 10% 10%
Commission, Consultancy, Technical, Management and Professional Fees 5% 10% 5% 10%
Supply of Goods other than by the manufacturer or producer 2% N/A 2% N/A
Co-location and telecommunications tower services 2% 5% 2% 5%
Supply or rendering of services other than those specifically listed in this Schedule 2% 5% 2% 5%
Construction of roads, bridges, buildings, and power plants 2% 5% 2% 5%
Any other form of construction and related activities 5% 10% 5% 10%
Brokerage fee 5% 10% 5% 10%
Directors’ fees N/A N/A 15% 20%
Compensation for loss of employment N/A N/A 10% 10%
Entertainers and sportspersons N/A 15% N/A 15%
Winnings from lottery, gaming, reality shows, etc. N/A N/A 5% 15%


Notably, where goods are supplied or services rendered or any eligible transaction involving non-passive income, the amount to be withheld shall be twice the rate specified in the Schedule where the Recipient has no Tax Identification Number.

Furthermore, the new Regulations also specifically state that the reduced Withholding Tax rates, as contained in a Double Tax Treaty between Nigerian and any other country, shall apply to an eligible recipient to the extent that such reduced rates are contained in the relevant Treaty or Protocol duly ratified by the National Assembly. This means the reduced Withholding Tax rates would now be automatically enjoyed by eligible non-residents without them having to write formally to the Federal Inland Revenue Service as previously required.

Timelines for Remittance of WHT

The amount deducted at source shall be remitted to Federal Inland Revenue Services on or before the 21st day of the month following the month of payment. In the case of remittance to a State Internal Revenue Service, where the payment is concerning Capital Gains Tax and Pay-As-You-Earn, the remittance is to be done not later than the 10th day of the month following the payment. Where it is related to any other deduction, it is to be made not later than the 30th day of the month following the month of payment.

The Regulations mandate a person making the deduction to submit a return to the relevant tax authority with evidence of remittance of the amount deducted. The submission is to be accompanied by a statement containing the name and address, tax identification Number (TIN), National Identification Number (NIN), RC Number or the equivalent of the Recipient, nature of the transaction, gross amount paid or payable, amount of tax deducted, as well as the calendar month to which the payment relates.

Tax Receipt and Credit

The Regulations also require that where an entity makes tax deductions from the invoice of a supplier and remits to the relevant tax authority, it should issue the supplier a receipt containing all relevant information of the supplier (as provided in the Returns filed to the Relevant Tax Authority. The supplier can use this receipt to claim income tax credit from its Relevant Tax Authority (whether the entity that made the tax deduction has remitted the amount deducted, or not). The relevant tax authority will impose applicable penalties and interest charges where the tax amounts deducted are not remitted promptly.


To free up cash flow for affected businesses, the following transactions are exempted from the obligation to deduct at Source. However, this should not be misinterpreted as an exemption from income tax obligations.

  • Compensating payments under a Registered Securities lending Transaction.
  • Distribution or dividend payment to a Real Estate Investment Trust or Company.
  • Across-the-counter transactions (i.e., transactions involving no established contractual relationship or prior formal contracting arrangement and in which payment is made instantly in cash or on the spot via electronic means.)
  • Interest and fees paid to a Nigerian bank by way of direct debit of the funds domiciled with the bank.
  • Supply of goods/materials by the manufacturer.
  • Transactions that relate to the importation of goods by non-resident suppliers which does not create a tax presence in Nigeria for the Supplier.
  • Insurance Premium,
  • Out-of-pocket expense that is normally expected to be incurred directly by the supplier and is distinguishable from the contract fees.
  • Payment relating to income/profit that is tax-exempt,
  • Reimbursable expenses,
  • Supply of Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Premium Motor Spirits (PMS), Automotive Gas Oil (AGO), Low Pour Fuel Oil (LPFO), Dual dual-purpose kerosene (DPK), and JET-A1.
  • Commission retained by a broker from monies collected on behalf of the principal in line with the industry norm for such transactions
  • Winnings from a game of chance or reality show with content designed exclusively for the promotion of entrepreneurship, academics, technological, or scientific innovation.
  • Any other payment in respect of income of profit which is exempt from tax


The Regulations contain some punitive provisions that aim to directly tackle non-compliance.  For instance, The Regulations provide that where an entity that is not registered for tax and issues an invoice for a supply of goods or services, the rate of deduction that should be applied should be twice the normally applicable rate.

Further, where a person who is mandated to deduct at source fails to do so and has failed to remit or has paid such a portion representing the required deduction to the recipient only an administrative penalty and one-off annual interest on the amount not deducted shall be due and payable.


In line with the Regulations’ aim of proposing ease of tax compliance and administration while reducing arbitrage between corporate and non-corporate business structures, the Regulations reflect emerging issues and adopt global best practices. Further, the Regulations have been innovative in making provisions to encourage tax registration by stipulating that where a business entity fails to register for tax, the tax to be deducted should be double the applicable rate. This is likely to drive tax registration by currently unregistered businesses. The reduction of the withholding rates for other low-margin businesses like retail and construction is commendable.



WTS Blackwoodstone

+234 903 3501 613