WHT on goods, services and construction contracts.
Withholding tax
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Rate applied
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Net paid to vendor
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Withholding tax is a deposit, not a separate charge
When a Nigerian business pays for goods, services, or a construction job, it does not hand over the full invoice and leave the tax to sort itself out later. It deducts a slice at source, keeps it back, and sends it to the tax authority on the vendor's behalf. That slice is withholding tax, and for the vendor it is not lost money. It is an advance on the income tax that will eventually fall due, claimed back as a credit when the vendor files. This tool answers the practical question both sides ask at the point of payment: how much comes off this contract, and what lands in the supplier's account. The mechanism also shifts collection onto the payer, so if you run accounts payable, you are the one on the hook to deduct correctly and remit on time.
Picking the right rate for the work
The calculator sorts a contract into one of four buckets, and each carries its own rate. Supply of goods sits at 2 percent. General services that are not separately listed also sit at 2 percent. Major construction, meaning roads, bridges, and buildings, is treated at 2 percent as the rate this calculator applies, while other construction and related activity moves up to 5 percent. Those are the figures modelled here, drawn from the long-standing structure of Nigerian withholding tax, but the 2025 tax reform is reworking several schedules as it phases in, so treat the precise percentages as a starting point and confirm the current position with the FIRS, the Federal Inland Revenue Service, or your state internal revenue service before you remit.
The split between 2 percent and 5 percent construction trips people up. A genuine roads or buildings contract attracts the lower rate, while ancillary work such as repairs, civil engineering services, and fit-out can fall into the 5 percent band. If a single contract bundles both, the safer practice is to split the invoice so each portion is withheld at its own rate rather than applying one blended figure.
The NGN 2 million exemption that most small vendors miss
Here is the part worth knowing. A small company is exempt from WHT deduction where the transaction value falls below NGN 2 million and the vendor holds a valid Tax Identification Number. Tick both boxes and the rate this calculator applies drops to zero. Miss either one, because the deal is NGN 2 million or more, or the vendor has no TIN, and the exemption falls away. A vendor without a TIN is treated harshly: the rate doubles, subject to a cap of 20 percent. So a 2 percent goods rate becomes 4 percent for a vendor who never registered.
Two near-identical contracts, opposite outcomes
To show how sharp that NGN 2 million line is, take a registered small company supplying goods. On the rates this calculator applies, a contract of NGN 1,800,000 is exempt, while a contract of NGN 2,100,000 crosses the threshold and is withheld at 2 percent. A difference of NGN 300,000 in headline value swings the tax from nothing to NGN 42,000.
| Step | Contract A (NGN 1,800,000) | Contract B (NGN 2,100,000) |
|---|
The chart below puts the two contracts side by side. The teal portion is what reaches the vendor, the dark sliver on the right bar is the NGN 42,000 withheld once the threshold is crossed.
A practical tip flows from this: vendors who routinely sit just over the line sometimes ask whether splitting one order into two below-threshold invoices avoids the deduction. It does not, and revenue authorities read artificial splitting as exactly that. The threshold looks at the genuine transaction value, not the way you slice the paperwork.
Common questions on contract WHT
Does the vendor lose the withheld amount for good?
No. The deduction is an advance on the vendor's own income tax. When the vendor files, they offset the withheld sum against their final liability using the WHT credit note the payer issues. Keeping every credit note is the only way to claim it, so a vendor who never collects them effectively pays the tax twice.
Who issues the WHT credit note, and why does it matter?
The deducting company prepares it and gives a copy to the vendor after remitting. That note is the vendor's evidence of the credit. Without it the tax authority has no easy way to match the deduction to the right taxpayer, so insist on receiving one for every deduction shown by this calculator.
Is a manufacturer selling its own goods withheld at the goods rate?
The goods rate here targets ordinary suppliers and traders rather than a manufacturer selling what it makes, which has historically been treated differently. Because the reform is shifting these edges, confirm the manufacturer position with the FIRS before assuming the 2 percent applies.