The 10% withholding tax on dividends, and the net amount received.
Net dividend received
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Withholding tax (10%)
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Gross dividend
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What lands in your account after a dividend
When a Nigerian company declares a dividend, the figure announced on the cash page is the gross dividend. You do not receive all of it. The company deducts withholding tax before paying you, remits that tax to the revenue authority, and credits your account with the balance. This calculator takes the gross dividend you enter and shows you the deduction and the net cash, so a shareholder can see what a declaration is actually worth and a company secretary can size the payment correctly.
The rate the calculator applies is 10 percent, and the same 10 percent attaches to interest income such as bank deposit interest. Withholding on investment income is one of the areas the 2025 tax reform has been revisiting, so treat the 10 percent as the figure modelled here and confirm the current rate with the Federal Inland Revenue Service before relying on it for a large distribution.
Why it is usually the end of the matter
The feature that makes dividends simple for most investors is that this withholding is generally the final tax. Once the 10 percent has been deducted at source, the dividend is not added to your other income and taxed again at your personal rate. That is different from, say, rental income, which you declare and which is taxed at your graduated rate. For dividends, the deduction the company makes closes the loop. It is why dividend income feels clean: you receive the net amount, keep it, and have no further filing to do on that specific income in the ordinary case.
This final-tax treatment is also what lets you compare a dividend against a bank deposit or a treasury bill on equal footing. All three suffer the same 10 percent at source, so the net figures are directly comparable without further adjustment.
A NGN 1,000,000 dividend, step by step
Take the tool's default. A company declares a gross dividend of NGN 1,000,000 to you. At the 10.00% rate this calculator applies, it withholds NGN 100,000 and pays you NGN 900,000 net. Because the withholding is the final tax, the NGN 900,000 is yours with nothing further to settle.
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A note on franked dividends and double counting
One trap catches companies paying dividends out of profits that have already borne company income tax. Nigeria has long had rules to stop the same profit being taxed punitively twice when it is paid out as a dividend, so the source of the distribution can affect how the dividend is treated. For the ordinary shareholder this rarely changes the net cash, because the 10 percent withholding still comes off the payment, but a company planning a large distribution should check the position with its tax adviser rather than assume the calculator's single deduction captures every nuance. The tool answers the shareholder's practical question of net cash received, which is what most users need.
Do I pay tax on dividends from foreign shares the same way?
Not necessarily. This 10 percent withholding is the mechanism for dividends paid by a Nigerian company. A dividend from a foreign company may be taxed differently, and foreign withholding tax and any double-taxation arrangements can come into play. If you hold offshore equities, confirm the treatment with the relevant state internal revenue service or a tax adviser rather than applying this calculator to them.
If I am in the top income tax band, do I still only pay 10 percent on dividends?
In the ordinary case yes, because the withholding is a final tax and the dividend is not stacked onto your other income. That is part of why dividend income can be efficient for higher earners compared with income taxed at the graduated personal rates. Confirm your own position with the FIRS if your circumstances are unusual.