On a contract, the client adds VAT (7.5%) to your price and then deducts withholding tax on the price before VAT, usually 2% for supplies, general services and building work, or 5% for professional and consultancy work. Some clients also keep the VAT and pay it to the tax office. Enter your contract sum below to see exactly what reaches your account.
How the Contract Payment Calculator works
- Enter the contract sum and say whether it already includes VAT.
- Choose the type of work. The withholding tax rate fills in, and you can change it.
- Say who pays the VAT to the tax office: you, or the client.
- The calculator shows the VAT, the WHT deducted and the amount you receive.
Worked example
A contractor wins a ₦5,000,000 renovation job for a company. VAT is extra and WHT on building work is 2%.
VAT: ₦5,000,000 × 7.5% = ₦375,000
Invoice total: ₦5,375,000
WHT deducted: ₦5,000,000 × 2% = ₦100,000
Amount received: ₦5,275,000
If the client deducts the VAT too and pays it directly, the contractor receives ₦4,900,000.
Common mistakes to avoid
- Quoting a price without saying whether VAT is included
- Working out WHT on the total including VAT instead of the price before VAT
- Not collecting WHT credit notes from clients
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Why you receive less than the invoice
Withholding tax is not an extra charge. It is an advance payment of your own income tax that the client pays on your behalf. Ask for the WHT credit note or receipt each time, because you can use it to reduce your company or personal income tax later.
Pricing contracts so you are not short
When you quote, decide whether your price includes VAT and say so in writing. Plan your cash flow around the amount you will receive, not the invoice total, especially on government and large company jobs where both VAT and WHT may be deducted at payment.
Frequently asked questions
Is withholding tax charged on VAT?
No. WHT is worked out on the amount before VAT.
What WHT rate applies to contracts?
Under the 2024 regulations, supply of goods, general services and building work are 2% for residents, and consultancy and professional work is 5%. Check your contract type.
Are these the latest tax rules?
They follow the Nigeria Tax Act 2025, which took effect on 1 January 2026, and were last checked on the date shown on this page. Tax rules can change, so confirm big decisions with a tax adviser or the Nigeria Revenue Service.
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