WHT on royalties, resident or non-resident.
Withholding tax
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Rate applied
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Net royalty
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What a royalty is, and why it is taxed at source
A royalty is what you pay for the right to use something you do not own: a patent, a trademark, copyrighted music or software, a franchise system, or rights over minerals. When a Nigerian business pays a royalty, the tax system does not wait for the recipient to declare it. Instead the payer deducts withholding tax before handing over the money and remits it to the revenue authority. This calculator works out that deduction and shows the net royalty the recipient actually receives, which is the figure that should land in their account.
The rate turns on one question: is the recipient resident in Nigeria or not. As modelled here, a resident recipient faces 5 percent and a non-resident faces 10 percent. That split is deliberate, because withholding from a non-resident is often the main chance the system gets to tax income leaving the country.
An NGN 3 million royalty to an overseas licensor
Suppose a Lagos company licenses software from a foreign developer and owes a royalty of NGN 3 million. The recipient is non-resident, so the rate this calculator applies is 10 percent. The payer withholds NGN 300,000 and remits it, paying the developer the net NGN 2.7 million. Had the licensor instead been a Nigerian resident, the rate would have been 5 percent, the withholding NGN 150,000, and the net NGN 2.85 million. Switch the residency dropdown to watch the numbers move between those two cases.
| Item | Non-resident | Resident |
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The payer carries the risk, not the recipient
The obligation to deduct and remit sits squarely with the person making the payment. Get it wrong and the penalties fall on the payer: failing to deduct can attract a penalty of a large fraction of the amount you should have withheld, and failing to remit what you did deduct adds its own penalty plus interest. So for a Nigerian business paying royalties, this is not the recipient's problem to manage. Withhold the correct percentage, remit on time, and keep the receipt as proof for both your records and the recipient's tax credit.
Treaties, credits, and a common trap
For a resident recipient, the 5 percent withheld is an advance credited against their final income tax, much like other withholding, so it is not an extra cost on top. The common trap is on the non-resident side: a double-tax treaty between Nigeria and the recipient's country can lower the 10 percent rate, sometimes materially, but the reduced rate is not automatic. The recipient usually has to establish treaty eligibility, often with a residence certificate, before the lower rate is applied. Pay the flat 10 percent without checking and an entitled non-resident overpays.
Is withholding tax on a royalty the recipient's final tax?
For a resident, usually not. It is an advance on their income tax, credited when they file, so if their overall rate is higher they pay more and if it is lower they may reclaim. For many non-residents with no other Nigerian presence, the withholding can effectively be the final tax on that royalty. Because the new regime has reshaped parts of this area, confirm your specific position with the Federal Inland Revenue Service, now operating as the Nigeria Revenue Service.
What if the foreign licensor has no Nigerian tax identification number?
Nigeria's withholding rules penalise payments to vendors without a valid tax identification number by charging a higher rate, broadly double the normal rate up to a ceiling, on non-passive payments. Royalties sit in a grey zone here, so before you pay a counterparty that cannot supply a TIN, take advice rather than assume the headline 5 or 10 percent still applies. The safe step is to verify the treatment with the revenue service first.
Does VAT apply to a royalty as well as withholding tax?
It can. VAT and withholding tax are separate charges that can both attach to the same royalty, with VAT generally at the standard 7.5 percent the wider system uses on top of the payment, while the withholding comes out of it. This calculator covers only the withholding piece. Treat VAT as a distinct question and confirm whether it applies to your particular licence with the Nigeria Revenue Service, since cross-border services have their own VAT rules that the 2025 reform has been adjusting.