The Federal Inland Revenue Service ("FIRS") in May 2022, issued a public notice highlighting changes to the rate of withholding taxes ("WHT") applicable to dividends, interests, and royalties payable by Nigerian entities/residents to residents of other countries ("Partner Countries") with whom Nigeria has Avoidance of Double Taxation Agreement ("ADTA" or "DTA") (the "Notice"). By the Notice, the tax burden on residents of Partner Countries is increased with effect from July 1, 2022.

This newsletter highlights the provisions of the Notice, and the implications as they relate to the payment of dividends, interests and royalties to parent companies resident in Partner Countries.


Nigeria is a contracting party to DTAs with several countries which sets out various withholding tax rates chargeable in line with the provisions of the respective DTAs. Under these DTAs, the applicable WHT rate on dividends, interests and royalties were either 7.5% or 10%. Nigeria opted to apply 7.5% across all DTA countries. This was the status quo until the issuance of the Notice by the FIRS.

In this Notice, the FIRS establishes and acknowledges that Nigeria has since 1999 been unilaterally implementing a uniform WHT rate of 7.5% on dividend, interest and royalties paid by residents of Nigeria and beneficially owned by residents of Partner Countries. The FIRS also acknowledged that this WHT rate is lower than the WHT rates under relevant local tax laws which are applicable within Nigeria.

By this Notice, and following the approval of the Minister of Finance, Budget and National Planning, the applicable WHT rate of 7.5% which applied uniformly to dividends, interests and royalties are discontinued, and with effect from July 1, 2022, the new rates were set to apply. This action is in no way contrary to the provisions of the DTAs to which Nigeria is a party, as the DTAs provide a maximum applicable rate of 10%.

The Notice also withdraws any ruling, direction or approval that had been previously issued by the FIRS on the WHT rate applicable with respect to any of the DTAs with effect from July 1. 2022. These approvals are as contained in the Information Circular on the Claim of Tax Treaty Benefits in Nigeria issued on June 3, 2021 (the "Circular").

The Circular was issued pursuant to the DTAs between Nigeria and the 16 countries listed therein, and pursuant to the provisions of current tax legislation1. The purpose of the Circular was to lay down a general description of the applications of the DTAs between Nigeria and other countries, especially on the treaty benefits that can be accessed by residents of either contracting countries by way of relief from double taxation, treaty tax rates on income from source countries, dispute resolution mechanisms and others.

One of such reliefs provided by virtue of this Circular is "Reduced (Treaty) withholding tax rates for passive income or fees for technical service derived from Nigeria by residents of a treaty partner".


Beginning from July 1, 2022, DTA residents were expected to begin payment of a new WHT rate of 10% on their dividends, interests and companies. It is important to note that DTA residents shall however not be required to pay WHT at the new rate in any of the following instances:

a) Where the tax payer is a resident of South Africa, China, Singapore, Sweden and Spain;

b) Where the applicable royalties are to be paid to individuals, then the rate of 5% will apply.


The new rates as provided by the Notice are already in force and being implemented by the FIRS. Nigerian companies with parent/holding companies and Special Purpose Vehicle (SPV) Companies in these DTA countries should be aware of these provisions, and how they may affect the structure and tax obligations of the company.


1. Sections 45 and 46 of the Companies and Income Tax Act ("CITA") 2004 (as amended), Sections 38 and 39 of the Personal Income Tax Act ("PITA") 2004 (as amended), Sections 61 and 62 of the Petroleum Profits Tax Act ("PPTA") 2004 as amended, and Section 41 of the Capital Gains Tax ("CGTA") 2004 (as amended).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.