Am I exempt from withholding tax as a small business in Nigeria?

Under the Deduction of Tax at Source (Withholding) Regulations 2024, effective January 1 2025, small businesses and unincorporated entities with annual turnover below 25 million naira are exempt from deducting withholding tax, but only if the supplier has a valid Tax Identification Number and the individual transaction value is 2 million naira or less within the relevant calendar month. This is a conditional exemption, not an automatic one.

What happens if a single supplier payment exceeds the 2 million naira threshold?

Once cumulative payments to a single supplier exceed 2 million naira within a calendar month, withholding tax becomes payable on the entire amount, not just the portion above the threshold. This cumulative, all-or-nothing structure is one of the most commonly misunderstood parts of the 2024 regulations and catches many small entrepreneurs off guard when a good month with one large client pushes them over the line.

What is the withholding tax rate if my supplier has no Tax Identification Number?

Where a supplier does not have a valid Tax Identification Number, the Withholding Tax Regulations 2024 require the payer to deduct at double the normal applicable rate specified in the regulations, rather than the standard rate.

What is the withholding tax rate on directors' fees in Nigeria now?

Under the 2024 regulations, withholding tax on directors' fees increased from 10 percent to 15 percent, effective January 1 2025.

What penalty applies if I deduct withholding tax but fail to remit it?

Where withholding tax is deducted but not remitted to FIRS by the due date, a penalty of 10 percent of the withheld amount applies per annum, in addition to interest calculated at the prevailing Central Bank of Nigeria minimum rediscount rate on the outstanding sum.

What happens if I forget to deduct withholding tax but still pay my supplier the full amount?

If a business fails to deduct withholding tax but pays the recipient the full contract amount, an administrative penalty and a one-off annual interest charge apply, rather than the harsher 10 percent per annum penalty that applies when tax is deducted but not remitted. The exact administrative penalty rate is not fixed in the regulations and can vary by case.

Is withholding tax an extra cost on top of Companies Income Tax?

Generally no. Withholding tax is an advance payment of the supplier's own income tax liability, credited against their final Companies Income Tax when they file. It becomes a genuine extra cost only in specific cases, such as certain foreign service providers where WHT is treated as the final tax rather than a credit.

Do I need a credit certificate after withholding tax is deducted from my payment?

Yes. The withholding agent is required to remit the deducted amount to FIRS and issue the payee a corresponding withholding tax credit certificate. This certificate is essential for the payee to claim the deduction as a credit against their own tax liability, or to claim a refund if they qualify for the 0 percent small company Companies Income Tax rate. Without it, the payee can lose the benefit of the deduction during an audit or reconciliation.

Are there transactions specifically exempt from withholding tax in Nigeria?

Yes. The 2024 regulations exempt several categories, including certain petroleum products such as Liquefied Petroleum Gas, Compressed Natural Gas, and Premium Motor Spirit, winnings from games or reality shows designed to promote entrepreneurship, academic, technological or scientific innovation, imported goods that do not create a taxable presence in Nigeria for the foreign supplier, and payments on income already exempt from tax.

How is withholding tax different from the small company Companies Income Tax exemption?

These are two separate thresholds under two different rules and are frequently confused. The Nigeria Tax Act 2025 small company exemption from Companies Income Tax uses a turnover threshold of 100 million naira. The Withholding Tax Regulations 2024 small business exemption from deducting WHT uses a lower, separate turnover threshold of 25 million naira, combined with a per-transaction cap of 2 million naira. A business can qualify for one and not the other.

What is the gross-up provision in the Withholding Tax Regulations 2024?

The gross-up provision ensures that where a contract specifies a net amount payable to the supplier, the payer must calculate the withholding tax on top of that figure so the supplier still receives the full agreed net amount after deduction, rather than the supplier absorbing the tax out of the agreed sum.

Does withholding tax apply to non-resident entertainers or sportspersons earning fees in Nigeria?

Yes. Under the 2024 regulations, non-resident entertainers and sportspersons earning fees from Nigerian engagements are subject to a 15 percent withholding tax rate.

Should a manufacturer selling their own products worry about withholding tax?

The Withholding Tax Regulations 2024 introduced specific relief for manufacturers supplying their own manufactured products, recognizing that low-margin manufacturing businesses are disproportionately affected by upfront WHT deductions on already-thin margins. The exact scope of this relief should be confirmed against the current gazetted regulation for your specific product category.

How quickly must withholding tax be remitted to FIRS after deduction?

Withholding tax deducted from a qualifying payment must be filed and remitted to FIRS on or before the 21st day of the month following the month in which the deduction was made.

Can I claim back withholding tax that was wrongly deducted from my small business?

If withholding tax is deducted despite your business meeting the small business exemption conditions, or if you qualify for the 0 percent small company CIT rate, you can generally set off the withheld amount against future tax obligations or claim a refund, provided you hold the withholding tax credit certificate issued by the payer. Without that certificate, recovering the amount becomes significantly harder.

What should a new Nigerian entrepreneur do first to stay compliant with withholding tax?

Register for a Tax Identification Number immediately at incorporation, request TINs from every supplier and contractor before making payments above small amounts, track cumulative monthly payments to each supplier against the 2 million naira threshold, and keep every withholding tax credit certificate you receive or issue, since these documents are what protect you during a FIRS audit or reconciliation.

Home › Business & Law › Managing Withholding Tax as a Nigerian Entrepreneur

Managing Withholding Tax as a Nigerian Entrepreneur (Updated for 2026)

By Samson Ese, Founder & Editor-in-Chief, Daily Reality NG | Warri, Delta State | Originally published November 21, 2025 | Updated August 10, 2026 | Reading time: 18 minutes

Update notice — different from the disclosure below: This article was first published November 21, 2025, before the Withholding Tax Regulations 2024 took full effect. It has been reviewed and updated August 10, 2026 to reflect confirmed 2025 enforcement patterns and the interaction with the Nigeria Tax Act 2025, which took effect January 1, 2026. Figures and thresholds below were re-verified at time of update, not carried forward unchanged from the original draft.

⏱️ Check This Before You Read Further

Before you rely on the ₦25 million exemption threshold discussed below, confirm your business's current classification and TIN status directly through FIRS's official portal — WHT is one of the most frequently amended tax areas in Nigeria, and specific rates have shifted twice since 2024.

Takes 3 minutes. Could save you from under-deducting on a supplier payment this month.

Blessing runs a small event-planning business in Enugu. In March 2026, a client paid her ₦2.3 million for a wedding contract — the biggest single payment her business had ever received. She didn't deduct withholding tax from the vendor she subcontracted, because her business turns over well under ₦25 million a year and she'd read somewhere that small businesses are exempt. She was half right. What she missed is the part almost nobody explains clearly: the exemption isn't about your business size alone — it's about the size of each individual payment, tracked cumulatively, every month, per supplier. Her subcontractor payment of ₦2.1 million that same month crossed the ₦2 million line, and the exemption she thought protected her simply didn't apply to that transaction.

This is the gap this guide exists to close. Withholding tax (WHT) is not a tax you pay on your own income — it's a tax you deduct from payments you make to other people and remit to FIRS on their behalf. Because it doesn't feel like "your" money, it's the obligation Nigerian entrepreneurs most consistently forget, and it's frequently the very first thing FIRS checks during a compliance review.

Quick Answer

Under the Withholding Tax Regulations 2024 (effective January 1, 2025), small businesses with annual turnover under ₦25 million are exempt from deducting WHT — but only if the supplier has a valid TIN and the payment to that supplier doesn't exceed ₦2 million in a single calendar month, cumulatively. Cross that line and WHT applies to the entire amount, not just the excess. Standard rates range from 5% to 15% depending on the transaction type, must be remitted by the 21st of the following month, and suppliers without a TIN get charged double the normal rate.

Jump to a section: Who This Is For Find Your Situation What Withholding Tax Actually Is The Small Business Exemption — And Its Trap Current WHT Rates for Entrepreneurs How to Deduct and Remit, Step by Step Why Credit Certificates Matter Penalties for Getting It Wrong Your 24-Hour Action Real-World Impact FAQ

Who This Article Is For

This is written for Nigerian entrepreneurs, sole business owners, and small company directors who pay contractors, consultants, landlords, or suppliers as part of running their business — whether you're registered as a limited company or still operating as an unincorporated entity. If you've ever paid a designer, a caterer, a logistics contractor, or rented office space for your business, this obligation already applies to you, whether or not anyone has told you so.

📍 Find Your Starting Point

Your Situation	Your Priority	Start Here
Turnover under ₦25M, occasional supplier payments	Confirm you actually meet both exemption conditions, not just one	Small Business Exemption
Growing fast, payments to one supplier increasing	Track cumulative monthly payments per supplier now	The ₦2M Trap
Never deducted WHT before	Understand rates and remittance deadlines before your next payment run	Current Rates
Worried about a past missed deduction	Understand the two different penalty tracks	Penalties

What Withholding Tax Actually Is

Withholding tax is an advance deduction taken from a payment at the point it's made, and remitted directly to FIRS by the person making the payment — not the person receiving it. If your business pays a graphic designer ₦500,000 for a logo project, you (the payer) may be required to hold back a percentage, pay the designer the reduced amount, and send the withheld portion to FIRS on the designer's behalf.

The designer isn't losing that money permanently — it becomes a credit against their own eventual Companies Income Tax or Personal Income Tax liability, provided you issue them a WHT credit certificate. This is the part entrepreneurs on both sides of a transaction routinely misunderstand: WHT is mostly a cash-flow timing mechanism, not an extra tax layered on top of everything else. It only becomes a genuine additional cost in specific edge cases — most notably certain payments to foreign service providers, where the WHT deducted is treated as the final tax rather than a credit.

The Small Business Exemption — And the ₦2 Million Trap

The Deduction of Tax at Source (Withholding) Regulations 2024, gazetted October 2, 2024 and effective January 1, 2025, introduced a specific relief aimed at reducing compliance burden on small Nigerian businesses. On paper, it looks generous: businesses and unincorporated entities with annual turnover under ₦25 million don't have to deduct WHT.

Read the actual condition carefully, though, because this is where Blessing's business — and thousands like hers — get caught out.

⚠️ The Two Conditions That Must BOTH Be True

The exemption only applies if (1) the supplier possesses a valid Tax Identification Number, and (2) the value of the transaction with that specific supplier is ₦2,000,000 or less within the relevant calendar month. This second condition is cumulative, not per-invoice — if you pay the same supplier ₦1.2 million on the 5th and another ₦1 million on the 20th of the same month, your total for that supplier that month is ₦2.2 million, and WHT now applies to the entire ₦2.2 million, not just the ₦200,000 above the line.

This structure is a genuinely contested point among Nigerian tax practitioners. Critics have pointed out a real policy contradiction: under the Nigeria Tax Act 2025, small companies with turnover under ₦100 million pay 0% Companies Income Tax — so if a company owes no CIT at all, deducting WHT as an "advance payment" of a tax that isn't due doesn't logically hold up. Yet the ₦25 million/₦2 million WHT exemption threshold is a separate, lower bar entirely, meaning plenty of small companies that are fully CIT-exempt are still required to have WHT deducted from — or deduct WHT on — payments that exceed that narrower limit.

Two Different Thresholds — Don't Confuse Them

Rule	Threshold	What It Exempts
Nigeria Tax Act 2025, small company CIT exemption	Turnover ≤₦100M, fixed assets ≤₦250M	0% Companies Income Tax
WHT Regulations 2024, small business exemption	Turnover <₦25M + per-supplier payment ≤₦2M/month	Obligation to deduct WHT on that payment
⚠️ Source: Nigeria Tax Act 2025 Section 56; Deduction of Tax at Source (Withholding) Regulations 2024, gazetted October 2, 2024. These are separate rules — meeting one does not automatically mean you meet the other.

Current WHT Rates Entrepreneurs Actually Deal With

Payment Type	Rate (2025 Regs onward)	Entrepreneur Note
Rent (office, warehouse, shop)	10%	Applies whether you're the landlord or the tenant business deducting
Consultancy, professional, technical, management fees	5–10%	Most commonly missed category among small service businesses
Contracts, construction, supply	5%	Applies to one-off supplier and contractor payments
Directors' fees	15%	Increased from 10% under the 2024 regulations
Commission	10%	Sales agents, referral partners
Non-resident entertainers/sportspersons	15%	Relevant if you're paying foreign talent for an event
Winnings — reality shows/games	5% resident / 15% non-resident	Exempt where the event promotes entrepreneurship, academic, or scientific innovation
Supplier with no valid TIN	Double the applicable rate	Strong reason to insist on TIN before paying any supplier
⚠️ Source: Deduction of Tax at Source (Withholding) Regulations 2024, First Schedule; Aluko & Oyebode regulatory briefing, September 2024; Grant Thornton Nigeria WHT overview.

How to Deduct and Remit — Step by Step

Confirm the supplier's TIN before you pay anything. This single habit protects you from the double-rate penalty and is the fastest thing to fix if you haven't been doing it. Ask for it in writing, not verbally — you'll need proof.
Identify the correct rate for the transaction type. Rent, consultancy, and contract payments all sit at different rates — don't default to a flat percentage across every payment.
Check the gross-up requirement if your contract specifies a net amount. If you agreed to pay a supplier a specific net figure, you calculate WHT on top of that so they still receive the full agreed amount after deduction — you don't shrink their payment to cover the tax.
Deduct at the point of payment, not after. Waiting until month-end to "sort it out" is where most small businesses lose track of cumulative supplier totals against the ₦2 million monthly threshold.
Remit to FIRS by the 21st of the following month. This deadline doesn't move, and it applies to every deduction made in the prior calendar month.
Issue a WHT credit certificate to the supplier immediately after remitting. This is not optional paperwork — it's the document your supplier needs to reclaim that money against their own tax bill.
Keep a running log per supplier, per month. The one habit that would have saved Blessing's event-planning business the confusion described at the start of this article — a simple spreadsheet tracking cumulative payments per supplier catches the ₦2 million line before you cross it, not after.

Why the Credit Certificate Is the Document That Actually Protects You

Founders on the receiving end of WHT deductions often treat the credit certificate as an afterthought — a piece of paper the payer eventually sends, if they remember. This is a mistake with real financial consequences. If your company qualifies for the 0% small company CIT rate, that certificate is what lets you formally set off or reclaim the WHT that was deducted from your payments during the year. Without it, during an audit or reconciliation, FIRS has no record connecting the deduction to your company, and you can lose the benefit entirely — money that was rightfully yours simply disappears into the system with no trail back to you.

Penalties — Two Very Different Tracks

What Went Wrong	Penalty	Severity
Deducted WHT but didn't remit it	10% of the withheld amount per annum + CBN minimum rediscount rate interest	Severe — compounds annually
Failed to deduct, but paid supplier full amount	Administrative penalty (rate not fixed in regulations) + one-off annual interest	Lighter — but still exposure
⚠️ Source: Aluko & Oyebode overview of the Deduction of Tax at Source (Withholding) Regulations 2024.

Notice the deliberate design here: the regulations punish deducting-but-not-remitting far more heavily than forgetting to deduct in the first place, because the first scenario means you took money that legally belonged to the government and held onto it — that reads as a more serious default than a genuine oversight.

Your 24-Hour Action

Your 24-hour action: Open your last two months of business bank statements and add up total payments to each individual supplier. If any single supplier crossed ₦2 million in either month and you didn't deduct WHT, calculate the exposure today and set the amount aside as a provision before FIRS finds it first. Takes 30–45 minutes. Changes whether a future compliance letter is a manageable correction or a compounding 10% annual penalty.

Real-World Impact

💰 The Wallet Impact: A small business that misses WHT deduction on a ₦2.5 million supplier payment at the 5% contract rate creates a ₦125,000 exposure that, left unremitted for a year, grows by roughly ₦12,500 (the 10% annual penalty) plus MRR-linked interest — turning a paperwork miss into a five-figure cost.

🗓️ The Daily Life Impact: Tunde, who runs a small print shop in Ibadan, now keeps a laminated card taped to his till listing the current WHT rates for the three transaction types he deals with most — rent, contractor payments, and consultancy — because remembering rates in the moment of paying a supplier was where he kept slipping.

🏪 The Business Impact: A digital marketing agency in Abuja with ₦18 million annual turnover now insists on collecting supplier TINs during onboarding, before the first invoice is even issued — turning a compliance requirement into a standard part of their vendor setup process rather than a scramble at payment time.

Frequently Asked Questions

Am I exempt from withholding tax as a small business?

Only if your turnover is under ₦25 million AND your supplier has a valid TIN AND the payment to that supplier stays at or under ₦2 million per calendar month. All three conditions must hold.

What happens if a payment exceeds ₦2 million?

WHT applies to the entire amount, not just the portion above ₦2 million — the exemption is all-or-nothing per supplier per month.

What rate applies if my supplier has no TIN?

Double the normal applicable rate for that transaction type.

What's the current rate on directors' fees?

15%, up from 10% under the 2024 regulations.

What penalty applies if I deduct WHT but don't remit it?

10% of the withheld amount per annum plus interest at the CBN minimum rediscount rate.

What if I forget to deduct but pay the full amount?

A lighter administrative penalty plus one-off annual interest — less severe than deducting and not remitting.

Is WHT an extra cost on top of CIT?

Generally no — it's an advance credit against the recipient's own tax, except in specific foreign-supplier cases where it becomes final tax.

Do I need a credit certificate?

Yes — without it you can lose the ability to claim the deducted amount as a credit or refund during an audit.

Are any transactions exempt from WHT entirely?

Yes — certain petroleum products, entrepreneurship-promoting competition winnings, imported goods with no Nigerian taxable presence, and already tax-exempt income.

How is the WHT small business exemption different from the CIT small company exemption?

They're separate rules with separate thresholds — ₦100M turnover for 0% CIT under the Nigeria Tax Act 2025, versus ₦25M turnover plus a ₦2M monthly per-supplier cap for the WHT deduction exemption.

What is the gross-up provision?

It ensures the supplier still receives the full agreed net amount after WHT is deducted, rather than absorbing the tax out of the agreed sum.

Does WHT apply to foreign entertainers paid in Nigeria?

Yes, at 15%, under the 2024 regulations.

Is there relief for manufacturers?

Yes — the 2024 regulations introduced specific relief for manufacturers supplying their own products, given how thin manufacturing margins are affected by upfront deductions.

When must WHT be remitted?

By the 21st day of the month following the month of deduction.

Can I reclaim wrongly deducted WHT?

Yes, generally by setting it off against future tax or claiming a refund — but only if you hold the WHT credit certificate.

Key Takeaways

The small business WHT exemption requires turnover under ₦25M AND a valid supplier TIN AND per-supplier payments at or under ₦2M per month — miss any one condition and the exemption doesn't apply.
The ₦2M threshold is cumulative and all-or-nothing: cross it and WHT applies to the whole amount, not just the excess.
No TIN means double the rate — collect supplier TINs before you pay, not after.
Deducting-but-not-remitting is penalized far more heavily (10% per annum) than an honest failure to deduct.
The WHT exemption threshold and the CIT small company exemption are two different rules with two different thresholds — don't assume qualifying for one means you qualify for the other.

Final verdict: If you run a Nigerian small business and have never tracked cumulative monthly payments per supplier against the ₦2 million line, start this month — it's the single most common WHT gap entrepreneurs discover only after FIRS finds it first.

For related compliance groundwork, see our guides on understanding the FIRS TaxPro Max platform, personal income tax and FIRS filing, the CAC registration master guide, registering an LLC without a lawyer, and our companion piece on directors' duties and CAMA liability.

Disclosure: This article references tax filing platforms and compliance tools that may appear in future Daily Reality NG content through affiliate or advisory partnerships. Nothing in this article is currently sponsored, and no rate or rule above was influenced by a commercial relationship.

Disclaimer: This article provides general educational information on Nigerian withholding tax obligations based on the Deduction of Tax at Source (Withholding) Regulations 2024 and the Nigeria Tax Act 2025, as verified at the time of this update. It is not tax, legal, or accounting advice. Rates, thresholds, and enforcement practice can change; consult a licensed Nigerian tax practitioner before making deduction or filing decisions for your specific business.

Samson Ese

Founder & Editor-in-Chief, Daily Reality NG. I write research-backed breakdowns of Nigerian business and tax compliance from Warri, Delta State. Read the full story of how Daily Reality NG was built.

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Managing Withholding Tax as a Nigerian Entrepreneur — 2026 Guide