What happens to WHT if a small company is working with a supply contract morethan ₦2 million?

This is where the law gets tricky. There is a "policy contradiction" between the Nigeria Tax Act 2025 and the Withholding Tax (WHT) Regulations 2024.

If the transaction is more than ₦2 million, the client is technically required to deduct WHT, even if you are a small company. Here is how that works and how you handle it:

1. The "Threshold" Rule

Under the latest Deduction of Tax at Source Regulations, a small company (Turnover ≤ ₦50m) is only exempt from suffering WHT if:

• They have a valid TIN.
• The transaction value is ₦2 million or less in a single month.

If your supply is ₦50 million:

Since ₦50m is obviously above ₦2m, your client will likely deduct WHT at the standard rate for supplies (which has been reduced to 2% for residents, down from the old 5%).

2. The "Policy Contradiction"

You might wonder: "If I am a small company and my income tax is 0%, why are they taking 2% from me in advance?"

• The Reality: The law still requires the deduction to ensure you are "in the net" and filing returns.
• The Result: Your client takes 2% (₦1,000,000 on a ₦50m supply) and remits it to the Nigerian Revenue Service (NRS) — formerly FIRS.

3. How to Get Your Money Back (The Credit Note)

Since your actual tax bill at the end of the year will be ₦0 (because you are a small company), that ₦1,000,000 deducted is effectively "overpaid tax." You have two ways to handle this:

1. WHT Credit Note: Your client must give you a WHT Credit Note. You will upload this when filing your annual returns.
2. Refund or Carry Forward: Because you owe ₦0, you can apply for a cash refund from the NRS (though this can be slow) or carry the credit forward to future years when your business grows beyond the ₦50m small-company threshold.

Summary of the Transaction

If you make a ₦50,000,000 supply as a small company:

• Gross Invoice: ₦50,000,000
• WHT Deduction (2%): ₦1,000,000
• Net Cash Received: ₦49,000,000
• At Year-End: You file your taxes showing ₦0 tax due. You then use your ₦1,000,000 credit note to show the government they owe you a refund.

Pro-Tip: To avoid cash flow issues, some small companies "split" invoices into smaller chunks under ₦2m across different months. Be careful: The tax authorities watch for "artificial splitting" to evade tax rules. It is safer to account for the 2% deduction in your pricing if you know the contract is large.