Withholding Tax on Dividends in Nigeria: Rates, Exemptions and How to Reclaim

Every quarter, when Nigerian-listed companies declare dividends, the Federal Inland Revenue Service quietly takes its share before a single kobo reaches your brokerage account. That deduction is withholding tax — a mechanism that turns companies into de facto FIRS collection agents. Understanding exactly how it works, who is exempt, and how to reclaim overpayments can meaningfully improve returns for retail and institutional investors alike.

What Is the Withholding Tax Rate on Dividends in Nigeria?

The standard withholding tax (WHT) rate on dividends paid by Nigerian companies is 10%, applied at source before payment reaches the shareholder. This rate is enshrined in the Companies Income Tax Act (CITA) Cap. C21, LFN 2004, and has remained unchanged despite multiple Finance Act amendments in 2019, 2020, 2021, and 2023.

In practice, a Nigerian Exchange Group (NGX)-listed company that declares a gross dividend of ₦1.00 per share will remit ₦0.10 directly to FIRS and credit shareholders with ₦0.90. The company files a WHT return and transfers the deducted amount to the relevant tax authority within 21 days of the end of the month in which the dividend was paid — a deadline set under the FIRS Establishment Act.

The rate applies uniformly to:

• Dividends from companies listed on the Nigerian Exchange (NGX)
• Dividends from unlisted private companies
• Dividends received by both resident individuals and resident corporate entities

For non-resident shareholders, the treaty network matters. Nigeria maintains Double Taxation Agreements (DTAs) with the United Kingdom, France, the Netherlands, Canada, South Africa, China, and several others. Under the Nigeria-UK DTA, for instance, the WHT rate on dividends may be reduced to 7.5% where the beneficial owner holds at least 10% of the paying company's voting shares. Non-residents not covered by any DTA remain subject to the standard 10% rate under Section 78 of CITA.

Are Any Dividends Exempt from Withholding Tax in Nigeria?

Yes — and the exemptions are more significant than most retail investors realise.

Pioneer status companies. Companies granted pioneer status by the Nigerian Investment Promotion Commission (NIPC) under the Industrial Development (Income Tax Relief) Act may pay dividends out of tax-exempt profits. Such dividends are statutorily exempt from WHT for the duration of the pioneer period, which typically runs three to five years. The Finance Act 2021 clarified that this exemption applies only to profits earned within the pioneer period, not to subsequently re-declared reserves.

Small and Medium Enterprises (SMEs). The Finance Act 2021 introduced a full WHT exemption on dividends paid by qualifying SMEs — companies with turnover below ₦25 million annually — provided the dividends are not paid from retained earnings accumulated before the SME threshold was met.

Real Estate Investment Trusts (REITs). Distributions from SEC-registered REITs listed on the NGX are exempt from WHT in the hands of unit holders, under regulations issued by the Securities and Exchange Commission in alignment with the Investment and Securities Act 2007. This exemption makes REITs structurally tax-efficient for income-seeking investors and explains part of the premium those instruments carry on the exchange.

Bonus shares (scrip dividends). Where a company issues bonus shares in lieu of a cash dividend, no WHT is deducted at the time of issuance. However, a disposal-time liability may arise if those shares are subsequently sold at a gain, creating a capital gains tax exposure under the Capital Gains Tax Act.

Inter-company dividends within groups. Dividends paid between companies in the same wholly-owned Nigerian group are exempt from WHT under Section 80(3) of CITA, provided the recipient company holds at least 100% of the paying company's shares and both are resident in Nigeria for tax purposes.

How Withholding Tax Works on the NGX

When you hold shares through a Central Securities Clearing System (CSCS) account and a company declares a dividend, the process unfolds automatically. The registrar (Cardinalstone Registrars, DataMax, or similar) calculates the gross dividend, deducts 10% WHT, and credits the net amount to your linked bank account on the payment date. Simultaneously, FIRS receives the aggregated WHT certificate from the company.

You, as the shareholder, receive a tax credit note — sometimes embedded in your dividend advice slip, sometimes issued separately. This document is your legal evidence of WHT suffered. Its reference number ties directly to the FIRS WHT database.

For corporate shareholders filing annual returns under CITA, this credit note is set off against the company's income tax liability for the year. For individual shareholders assessed under the Personal Income Tax Act (PITA), the WHT credit is applied against their personal income tax bill. In both cases, the 10% deduction is not a final tax — it is a prepayment.

The NGX Regulation (NGX RegCo) requires all listed companies to publish dividend notices at least 21 days before the qualifying date (record date), disclosing the gross dividend per share, the WHT rate applied, and the net dividend per share. This disclosure appears in daily official bulletins and is archived on the NGX data portal.

How to Reclaim Overpaid Withholding Tax from FIRS

Overpayment scenarios arise in several situations: a non-resident entitled to a reduced treaty rate was taxed at 10%; a company was incorrectly subjected to WHT on an exempt distribution; or a technical error by the registrar resulted in double deduction.

The reclaim procedure is governed by Section 69 of the FIRS Establishment Act 2007 and the FIRS Refund Policy circular of 2022:

1. File a formal refund application addressed to the Integrated Tax Office (ITO) where the payer company is registered, not the office of the individual claimant.
2. Attach the original WHT tax credit notes, dividend advice slips, CSCS statement confirming share ownership on the record date, and — for treaty-based claims — a certificate of tax residence issued by the competent authority in the claimant's home jurisdiction.
3. FIRS is statutorily required to process valid refund claims within 90 days of receipt, though in practice processing times have been considerably longer. The FIRS Medium Term Revenue Strategy 2022-2026 targets a reduction of refund backlogs via the TaxProMax platform, which now accepts electronic submissions.
4. Approved refunds are paid via electronic funds transfer to a Nigerian bank account registered on TaxProMax. Non-residents must designate a registered tax representative in Nigeria to receive correspondence and coordinate payment.

For claims involving treaty reductions, the process requires advance clearance: the non-resident must submit a DTA claim form before the dividend payment date to ensure the reduced rate is applied at source. Post-payment treaty refunds are significantly more cumbersome.

Where a refund is denied or delayed beyond 90 days, the claimant may appeal to the Tax Appeal Tribunal (TAT) under the Federal Inland Revenue Service (Establishment) Act, without first paying the disputed amount — a provision that distinguishes WHT refund disputes from general income tax objections.

For further context on how dividend income interacts with other categories of Nigerian investment taxation, see the full guide to FIRS tax on investment income.

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Regulatory note: Withholding tax on dividends in Nigeria is governed by the Companies Income Tax Act (CITA) Cap. C21 LFN 2004, the Personal Income Tax Act (PITA) Cap. P8 LFN 2004, and associated Finance Acts. Treaty-reduced rates require compliance with specific DTA procedural requirements as administered by FIRS. The Cowrie is an independent editorial publication. It does not hold a financial services licence and nothing in this article constitutes tax advice, investment advice, or legal advice. Readers should consult a qualified tax adviser registered with the Chartered Institute of Taxation of Nigeria (CITN) for guidance specific to their circumstances.