Your Client Deducted WHT From Your Invoice. How Do You Claim the Tax Credit?

For many Nigerian freelancers, this is where the confusion begins. You know some money was deducted, but do you know where it went? Have you received proof of the deduction? And can you use it to reduce the tax you owe when filing your annual return?

What happens when a client deducts WHT?

Withholding tax is generally an advance payment of income tax. A client making a qualifying payment deducts a percentage and remits it to the relevant tax authority on behalf of the person receiving the income.

For example, if you invoice a company ₦500,000 for a service that attracts 5% WHT, the company deducts ₦25,000 and pays you ₦475,000.

That ₦25,000 is not automatically a lost part of your earnings. It can be claimed as a tax credit against your income tax liability, provided the deduction qualifies and you have the required evidence.

The applicable rate depends on the nature of the service and the recipient’s status. Under the Deduction of Tax at Source (Withholding) Regulations 2024, resident professional, technical and consultancy fees generally attract 5%. Other transactions may have different rates.

Don’t leave without your WHT receipt

After deducting WHT, your client should provide a receipt showing key details, including your name, Tax Identification Number, the nature of the transaction, the gross payment and the amount deducted.

This receipt serves as evidence when you claim the tax credit.

If your client has deducted WHT but has not sent the receipt, request it. The regulations also provide that a recipient can receive the tax credit even where the client issued the receipt but failed to remit the deduction. The outstanding remittance then becomes the client’s tax liability.

How do you claim the deduction?

When filing your annual income tax return, submit the relevant WHT receipts to the tax authority responsible for your personal income tax. For an individual freelancer, this is generally the State Internal Revenue Service where they are resident.

The qualifying WHT deductions can then be applied against your assessed income tax.

If the credits exceed your tax liability, the applicable rules on excess credits and refunds may come into play.

The key thing to remember: whenever a client deducts WHT from your invoice, ask for the receipt and keep it with your payment records. A deduction you cannot properly document may become difficult to claim.

LessaTax helps freelancers and business owners organise invoices, payment records and other supporting documents, so they have the information they need when tax season comes around.