VAT and WHT affect how Nigerian businesses invoice their clients, but they work differently. VAT is added to your invoice at 7.5% if your business is required to charge it, while WHT is deducted by the client from your payment and remitted to the tax authority on your behalf.<\/p>\n
Knowing how both taxes work helps you understand what to include on your invoices, how much to charge, and what to expect when a client pays. This guide explains the current VAT and WHT rules in Nigeria, with practical invoice examples to show how the calculations work.<\/p>\n
The Nigerian tax system operates through different authorities that oversee different tax types and different taxpayer categories.<\/span><\/p>\n Several taxes directly affect <\/span>how invoices are<\/span><\/a> issued in Nigeria:<\/span><\/p>\n To issue tax-compliant invoices, businesses may need:<\/span><\/p>\n Both numbers must be displayed on the invoices according to the requirements. The NRS issues TINs and VAT numbers, which taxpayers must use for their tax filings, remittances, and audits.<\/span><\/p>\n Non-compliant invoices can result in:<\/span><\/p>\n Proper invoicing protects both your business and your clients.<\/span><\/p>\n VAT is a 7.5% tax on taxable goods and services in Nigeria. Businesses required to charge VAT add it to their prices and show it separately on invoices. The rate remains 7.5% under the Nigeria Tax Act, 2025, which took effect on 1 January 2026.<\/p>\n The Nigeria Tax Administration Act, 2025 defines a small business as one with annual gross turnover of \u20a6100 million or less and total fixed assets below \u20a6250 million. Businesses providing professional services are excluded from this classification.<\/p>\n Qualifying small businesses are exempt from charging VAT. However, they can choose to opt out of the exemption by notifying the Nigeria Revenue Service and registering to charge VAT.<\/p>\n Some goods and services are exempt from VAT, while others are taxable at 0%. These categories are not the same, so check how a supply is classified before adding VAT to an invoice.<\/p>\n Examples of supplies that may fall under these categories include:<\/p>\n Exempt supplies and zero-rated supplies also have different rules for claiming input VAT. If you are unsure which category applies to what you sell, confirm with a tax professional before issuing the invoice.<\/p>\n If your business is required to charge VAT, show it as a separate line on the invoice. Include:<\/p>\n Calculate VAT by multiplying the taxable amount by 7.5%. For example, if a service costs \u20a6200,000, the VAT is \u20a615,000. The total invoice amount is therefore \u20a6215,000. You can use this formula when calculating VAT on an invoice<\/a><\/p>\n People often mistakenly think that Withholding Tax functions in the same way as VAT due to a common misconception.\u00a0<\/span><\/p>\n Withholding Tax (WHT) is an advance payment of income tax deducted from certain payments to suppliers. Instead of paying the full amount to you, the client deducts the applicable percentage and remits it to the relevant tax authority on your behalf.<\/p>\n WHT is not an extra charge you add to your invoice. It is deducted from the amount the client owes you. In most cases, you can use the deduction as a credit against your income tax.<\/p>\n The client needs to create a WHT credit note after deducting WHT, which serves as evidence of tax payment and enables the taxpayer to decrease upcoming tax obligations. The inability to obtain WHT certificates results in taxpayers <\/span>experiencing double taxation<\/span><\/a>.<\/span><\/p>\n The applicable rate depends on the type of transaction and whether the supplier is a Nigerian resident. Under the Deduction of Tax at Source (Withholding) Regulations, 2024, common rates for resident suppliers include:<\/p>\n These rates vary depending on the type of transaction and the status of the taxpayer.<\/span><\/p>\n WHT is calculated as a percentage of the amount invoiced excluding VAT, and it is deducted before the payment is issued.<\/span><\/p>\n The 2024 regulations provide an exemption from the obligation to deduct WHT for qualifying small companies, provided the supplier has a valid Tax Identification Number (TIN) and the transaction value does not exceed \u20a62 million during the relevant calendar month.<\/p>\n This exemption concerns the client’s responsibility to deduct WHT. It does not automatically exempt the supplier from other tax obligations. Because the regulations refer to an earlier definition of a small company, confirm eligibility with a tax professional before relying on the exemption.<\/p>\n When a client deducts WHT from your payment, request the receipt showing the amount withheld and the relevant transaction details. The receipt serves as evidence of the deduction when you claim the amount as a tax credit.<\/p>\n Keep it with your invoice and payment records. If the client deducts WHT but does not provide the receipt, follow up and request it.<\/p>\n The invoices are the primary evidence of income for the computation of Company Income Tax. The FIRS makes use of the invoices to compute the following:<\/span><\/p>\n Businesses should maintain the following documents:<\/span><\/p>\n Suppose a VAT-registered consultant charges a Nigerian company \u20a6500,000 for professional services. The service attracts 7.5% VAT, and the client must deduct 5% WHT.<\/p>\n First, calculate the VAT:<\/p>\n Next, calculate WHT. The 5% deduction applies to the service fee before VAT, not the VAT-inclusive total.<\/p>\n The client pays the consultant \u20a6512,500 and remits the \u20a625,000 WHT to the relevant tax authority. The consultant is responsible for accounting for the \u20a637,500 VAT collected.<\/p>\n The consultant should keep the WHT receipt or credit note as evidence of the deduction. The \u20a625,000 can be claimed as a tax credit, subject to the applicable rules.<\/p>\n Suppose a business supplies goods worth \u20a6800,000 to a company. If the goods are subject to VAT and the supplier is required to charge it, the invoice will show VAT separately.<\/p>\n Calculate the VAT:<\/p>\n If the transaction also attracts 2% WHT, the client deducts \u20a616,000 from the goods value.<\/p>\n The client pays the supplier \u20a6844,000 and remits the \u20a616,000 WHT to the relevant tax authority. The supplier accounts for the VAT collected, subject to the applicable VAT rules.<\/p>\n However, not every sale of goods attracts WHT. The applicable regulations provide exemptions for certain transactions, including qualifying supplies by manufacturers or producers. Check whether the transaction is subject to WHT before including a deduction in your payment calculation.<\/p>\n When preparing an invoice that includes VAT and WHT, show the amount for each clearly. VAT is added to the taxable amount, while WHT is deducted by the client from the payment.<\/p>\n Under Section 153 of the Nigeria Tax Act, 2025, a VAT invoice must contain the following details:<\/p>\n The invoice should also show the VAT amount separately so the client can identify the tax charged. It must be issued when the supply is made, even if the client has not paid yet.<\/p>\n For clarity, structure the invoice to show:<\/p>\n WHT should not be presented as an additional tax charge added to the invoice total. The client calculates and deducts it when making payment, then remits it to the relevant tax authority.<\/p>\n If the transaction is subject to WHT, you can include a short note explaining that the client should provide evidence of the deduction after remittance.<\/p>\n\n
What Are the Main Taxes Affecting Invoicing?<\/b><\/h3>\n
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Tax Identification Requirements<\/b><\/h3>\n
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Why Compliance Matters<\/b><\/h3>\n
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What Is VAT and Who Charges It?<\/b><\/h2>\n
Who Must Register for VAT?<\/strong><\/h3>\n
VAT Exemptions<\/strong><\/h3>\n
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What Are the VAT Requirements on Nigerian Invoices?<\/strong><\/h3>\n
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How Do You Calculate VAT in Nigeria?<\/strong><\/h3>\n
What Is WHT and Who Deducts It?<\/b><\/h2>\n
What Is Withholding Tax?<\/strong><\/h3>\n
Who Deducts WHT?<\/strong><\/h3>\n
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WHT Certificates and Credits<\/strong><\/h3>\n
What Are the Common WHT Rates in Nigeria?<\/strong><\/h3>\n
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\n Transaction<\/th>\n WHT rate<\/th>\n<\/tr>\n \n Professional, consultancy, technical and management fees<\/td>\n 5%<\/td>\n<\/tr>\n \n Commission<\/td>\n 5%<\/td>\n<\/tr>\n \n Other services not specifically listed<\/td>\n 2%<\/td>\n<\/tr>\n \n Supply of goods or materials by someone other than the manufacturer or producer<\/td>\n 2%<\/td>\n<\/tr>\n \n Construction of roads, bridges, buildings and power plants<\/td>\n 2%<\/td>\n<\/tr>\n \n Other construction and related activities<\/td>\n 5%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n How Do I Calculate Withholding Tax in Nigeria?<\/b><\/h3>\n
Can Small Companies Be Exempt from Deducting WHT?<\/strong><\/h3>\n
What Happens When a Client Deducts WHT?<\/strong><\/h3>\n
Company Income Tax (CIT) and Invoicing<\/b><\/h2>\n
How Does CIT Relate to Invoices?<\/b><\/h3>\n
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What Should I Keep for CIT Compliance?<\/b><\/h3>\n
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Worked Example: A \u20a6500,000 Services Invoice<\/strong><\/h2>\n
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\n Invoice description<\/th>\n Amount<\/th>\n<\/tr>\n \n Professional service fee<\/td>\n \u20a6500,000<\/td>\n<\/tr>\n \n VAT (7.5%)<\/td>\n \u20a637,500<\/td>\n<\/tr>\n \n Invoice total<\/td>\n \u20a6537,500<\/td>\n<\/tr>\n \n Less: WHT (5% of service fee)<\/td>\n (\u20a625,000)<\/td>\n<\/tr>\n \n Net amount payable<\/td>\n \u20a6512,500<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n Worked Example: A Goods Invoice<\/strong><\/h2>\n
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\n Invoice description<\/th>\n Amount<\/th>\n<\/tr>\n \n Cost of goods<\/td>\n \u20a6800,000<\/td>\n<\/tr>\n \n VAT (7.5%)<\/td>\n \u20a660,000<\/td>\n<\/tr>\n \n Invoice total<\/td>\n \u20a6860,000<\/td>\n<\/tr>\n \n Less: WHT (2% of goods value)<\/td>\n (\u20a616,000)<\/td>\n<\/tr>\n \n Net amount payable<\/td>\n \u20a6844,000<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n How to Show VAT and WHT on the Invoice<\/strong><\/h2>\n
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How Should You Display VAT and WHT?<\/strong><\/h3>\n
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\n Invoice detail<\/th>\n What to include<\/th>\n<\/tr>\n \n Supply amount<\/td>\n Cost of goods or services before VAT<\/td>\n<\/tr>\n \n VAT<\/td>\n Applicable rate and VAT amount, shown separately<\/td>\n<\/tr>\n \n Invoice total<\/td>\n Supply amount plus VAT<\/td>\n<\/tr>\n \n WHT<\/td>\n A note that the client may deduct WHT where applicable<\/td>\n<\/tr>\n \n Net payment<\/td>\n Amount remaining after any applicable WHT deduction<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n