VAT and WHT in Nigeria: What's the Difference?
They arrive on the same invoice, as percentages, both headed to FIRS — and almost everything else about them is opposite.
Cited against the NTA 2025 Act textValue Added Tax and Withholding Tax get confused constantly, and the confusion is reasonable: they arrive on the same invoice, they are both percentages, they both end up at FIRS, and both are usually explained by someone assuming you already know the difference.
Almost everything else about them is opposite. One is added to what your customer owes; the other is taken out of what they pay you. One is somebody else's tax that you are collecting; the other is your tax, collected early by somebody else. Getting them the wrong way round costs real money in both directions — and the most common version of that mistake quietly overpays tax you had already borne.
- VAT is added to the invoice; WHT is deducted from the payment. Both are calculated on the same VAT-exclusive amount — never on the invoice total, and never on each other.
- VAT is not your tax. You collect it and pass it on. WHT withheld from you is your tax, paid early — an asset creditable against your company income tax, not a cost and not a discount.
- Different people remit them. The supplier remits VAT; the customer remits WHT. Which means the money deducted from your invoice is being paid to FIRS by someone else, on your behalf, and you need their credit note to prove it.
Both, on one invoice, in opposite directions
Start with the thing that causes the trouble: a single ₦1,000,000 invoice where both taxes apply. Change what the invoice is for — the withholding rate follows the transaction type, not the customer — and watch which figure goes up and which comes down.
Both taxes are calculated on the same ₦1,000,000 — not on each other, and not on the invoice total. Switch the supply to exempt and the VAT disappears while the WHT does not: they are independent of one another, which is exactly why they get confused.
The two panels underneath are not an analogy. They are the entries Core Ledger actually posts on each side of that invoice, and they mirror each other exactly: your VAT Payable is your customer's VAT Recoverable, and your WHT Receivable is their WHT Payable. The same two amounts, viewed from opposite ends of the same transaction.
What each one is actually taxing
The clearest way to keep them apart is to remember that they are taxing two entirely different things, and that only one of the two is a tax on you.
That second definition is the one worth holding on to. Withholding tax is not a separate tax with its own life — it is company income tax, or personal income tax, taken at source before the money reaches you. Which is why it comes back to you later as a credit rather than disappearing, and why treating it as a cost is a straightforward error.
The trap: different people remit them
On one invoice, two obligations, sitting with two different parties:
- VAT is remitted by the supplier. You charged it, you hold it, you owe it — and on your return you owe the net figure: the VAT you charged on sales, less the VAT you were charged on purchases and expenses.
- WHT is remitted by the customer. They deducted it from your payment, and it is their job to send it to FIRS. Not yours. Their penalty if they don't, too — but also their credit note to issue, which is where this stops being an abstract point.
The rates, and why only one of them is simple
VAT is a single rate: 7.5%, on standard-rated supplies. There are exempt and zero-rated categories where it does not apply, and a registration threshold that decides whether you charge it at all — both subjects of their own, and neither one changes the rate.
Withholding tax has no single rate. It depends on what the payment is for, which is why the selector above changes the number and why a flat “5% WHT” assumption goes wrong so often. These are the categories Core Ledger's engine holds as FIRS reference rates:
| What the payment is for | WHT rate |
|---|---|
| Dividends | 10% |
| Interest | 10% |
| Royalties | 10% |
| Rent (corporate) | 10% |
| Management fees | 10% |
| Directors' fees | 10% |
| Professional services | 5% |
| Consultancy / technical services | 5% |
| Supply of goods | 5% |
| Construction (resident) | 2.5% |
| Construction (non-resident) | 5% |
Two of these are worth noting because they break the pattern people expect. Construction by a resident contractor is 2.5% — the lowest rate on the table, and half what an ordinary supply of goods attracts. And the same construction work by a non-resident is 5%: the rate follows residence, not the work.
Where each one lands in your books
Four accounts, two of them assets and two of them liabilities, and every one of them already in the default Nigerian chart of accounts:
| Account | Code | What it holds |
|---|---|---|
| VAT Recoverable (Input VAT) | 1260 | Asset · VAT you were charged |
| VAT Payable (Output VAT) | 2200 | Liability · VAT you charged |
| WHT Receivable | 1250 | Asset · credit against your CIT |
| WHT Payable | 2300 | Liability · withheld from your vendors |
The structural difference is in what happens next, and it is the single most useful thing to take from this article. VAT nets. Input VAT and output VAT meet in the same return, and you remit the difference. WHT does not net. Its two sides never meet: the payable is remitted to FIRS as its own obligation, while the receivable waits to be claimed against your company income tax — a different tax, a different return, a different deadline.
Two taxes, four accounts, one invoice. The one that nets is not your money; the one that doesn't is.
The credit note is the whole point
A WHT credit is only as good as the evidence behind it. When a customer withholds from your invoice they should issue you a withholding tax credit note — the document that proves the deduction was made and remitted in your name. Without it, the amount sitting in WHT Receivable is a number you believe rather than a credit you can claim.
Core Ledger records the certificate number against the revenue it belongs to for exactly this reason: at the point you compute company income tax, the question is not how much was withheld from you but how much you can evidence. Chase the credit note while the payment is recent and the person who processed it still remembers you — not in month eleven, alongside everything else.
What happens when WHT goes in late
The companion Nigeria Tax Administration Act 2025 sets one late-remittance regime covering withholding tax and PAYE: a flat penalty on whatever was not remitted on time, plus interestNTAA 2025 s.65. The flat component is 10%. The interest is pegged to the CBN Monetary Policy Rate plus a spread the Minister sets, which had not been gazetted at the time of writing.
Note who that lands on. If a customer withholds from your invoice and never remits it, the exposure is theirs — but the credit you were counting on is the casualty. VAT has its own filing and remittance obligations with their own consequences; this article doesn't attempt to put a figure on those, and neither should anyone quoting the WHT rule at you as though it covered both.
Five mistakes that actually cost money
Treating WHT as a discount or a bad debt. The most expensive one on the list. Money withheld from your invoice is not revenue you lost — it is tax you already paid. Write it off and you have thrown away a credit against your CIT.
Calculating WHT on the VAT-inclusive total. Both taxes are computed on the same figure: the value of the work, before VAT. Withholding on the invoice total over-deducts, and your vendor will notice.
Netting your WHT receivable against your WHT payable. They are separate obligations to separate ends of the system. What you withheld from vendors must be remitted in full, whatever you are owed elsewhere.
Assuming an exempt supply means no withholding. The two flags are independent. A supply outside VAT can still attract WHT at its category rate — set the toggle above to Exempt and the deduction stays exactly where it was.
Applying one WHT rate to everything. Rent at 10% and construction by a resident contractor at 2.5% sit on the same table. A default of 5% is wrong in both directions, and under-withholding is the direction with a penalty attached.
None of this is difficult once the shape is clear: VAT goes up and passes through you; WHT comes down and comes back to you. The arithmetic is the easy part — the calculators below will do it on your own figures — but the arithmetic is not usually what goes wrong.
Everything above is general information about published rules, not advice about your situation. Rates are checked against the same reference schedule Core Ledger's tax engine runs on — for anything unusual, particularly a non-resident counterparty or a transaction that doesn't sit cleanly in one category, take it to a professional who can see your whole position.
The Core Ledger team tracks Nigerian tax legislation so the platform's compliance tooling — and this blog — stay current with it.