Nigerian withholding on dividends, rent and goods
Which Nigerian payments besides professional fees carry withholding tax, the rates on dividends, interest, rent, goods, royalties and directors' fees.
By Achekam · · 4 min read · For Accountants & audit firms in Nigeria
Most Nigerian clients know they must deduct withholding tax from their accountant's fee. Fewer realise how many of their other payments carry the same duty: the rent on the office, the dividend to the shareholders, the interest on a director's loan, the fee to the board, and even ordinary purchases of goods from a trader.
Each of those is a potential penalty if the client pays in full without deducting. For a firm, a review of a client's withholding obligations is one of the more useful things it can do, and one of the easiest to overlook. This article sets out the main categories and rates, the remittance rules, and what Achekam computes once its rules are approved.
Dividends, interest and rent
At the time of writing, Nigerian withholding tax is 10% on dividends, interest and rent.
These three categories catch many owner-managed companies:
- Dividends declared to shareholders, including the owners themselves.
- Interest paid on loans, including loans from directors or related companies.
- Rent paid for premises, equipment or vehicles.
A family company paying rent to the founder for the building it occupies is a classic case. The rent is a deductible expense for the company and income for the founder, and the company must deduct withholding tax before paying it.
Goods bought from non-manufacturers
Withholding also reaches ordinary trading. At the time of writing, it is 2% on payments to resident suppliers of goods who are not the manufacturer.
The distinction between a manufacturer and a trader matters. A client buying stock directly from the factory deals with different rules from one buying the same stock through a distributor. Ask clients to classify their main suppliers, and keep that classification on file so that payments are treated consistently month after month.
Royalties and directors' fees
Two further categories are worth checking for every corporate client:
| Payment | Rate at the time of writing |
|---|---|
| Dividends, interest, rent | 10% |
| Goods from resident suppliers who are not the manufacturer | 2% |
| Royalties paid to companies | 10% |
| Royalties paid to individuals | 5% |
| Directors' fees, resident directors | 15% |
| Directors' fees, non-resident directors | 20% |
| Commission, consultancy, technical, management and professional fees | 5% resident, 10% non-resident |
Royalties include payments for the use of software, brands and technical know-how, which are common in companies that license from a parent or a foreign partner. Directors' fees are a separate category from salaries: a non-executive director paid a board fee is subject to the directors' fees rate.
The rates on fees come from the Deduction of Tax at Source (Withholding) Regulations 2024, kept in force by the Nigeria Tax Administration Act 2025, rather than from the Nigeria Tax Act itself. PwC's Nigerian withholding tax summary sets out the rates by type of payment and the instrument behind them. Professional fees are covered in more depth in withholding tax on a firm's fees in Nigeria.
A worked example in words
Consider a family company that rents its warehouse from its founder, pays her a board fee as a non-executive director, and declared a dividend at the year end. Three separate withholding obligations arise. The rent is paid net of the rent rate, the board fee net of the resident directors' fee rate, and the dividend net of the dividend rate. Each deduction is remitted to the NRS by the 21st of the month after payment, and the founder receives evidence of each one.
In many such companies, none of the three is deducted, because the payments go to the owner and feel like internal transfers. They are not. The founder is a separate taxpayer from the company, and the company's duty to deduct does not depend on who the payee is.
Remitting on time
Deducting is only half the obligation. Withholding tax not remitted to the NRS by the 21st of the following month attracts 10% a year plus interest, and failing to deduct it at all attracts a 40% penalty. State revenue service remittance dates are uncertain in the research, so treat State-level withholding separately and check the State's guidance.
A practical review for each corporate client, done once a year and whenever the business changes:
- List the client's regular payments by type: rent, interest, dividends, royalties, directors' fees, goods and services.
- Mark which carry withholding tax and at what rate.
- Check a sample of payments to see whether tax was deducted at the right rate.
- Check that the deducted tax was remitted by the 21st of the following month.
- Confirm the payees received evidence of the deduction.
Where the review finds payments made in full without deduction, discuss with the client how to put it right before the authority finds it. Penalties for late Nigerian returns and payments shows what is at stake.
What Achekam computes once approved
Once its rules are approved, Achekam's Revenue Service Centre computes Nigerian withholding tax, alongside company income tax with the Development Levy and the minimum effective tax rate check, VAT, capital gains and stamp duty. Specialised regimes, such as petroleum, extractive and non-resident digital businesses, are refused as assessment required.
The condition is real. Every Nigerian tax figure in Achekam's rule book was seeded "under review", and Achekam computes nothing from a figure until an Achekam platform administrator approves it. No firm user can change a rate. Until the withholding rules are approved in your workspace, keep the client's withholding schedule in a workbook, with the rate table above and a reference to the instrument for each rate.
One client this week
Pick a corporate client with rent, a director's loan or board fees, and run the five-step review on last quarter's payments. Write up what you find, and agree any corrections with the client before the next remittance date.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
