YMOBooksFree Tax Calculator Nigeria: How to Calculate PAYE, VAT & WHT
Taxes are a part of doing business in Nigeria. Whether you're a small business owner, freelancer, or managing a company, understanding how PAYE, VAT, and WHT work helps you stay compliant and avoid penalties. This guide explains each tax type and how to calculate them.
1. PAYE (Pay As You Earn)
PAYE is the income tax deducted from an employee's salary by the employer. It's calculated based on the employee's annual income using the bands approved by the Federal Inland Revenue Service (FIRS).
PAYE Tax Bands (2024/2025)
| Annual Income (₦) | Tax Rate |
|---|---|
| First ₦300,000 | 0% |
| Next ₦300,000 (₦300,001 - ₦600,000) | 7% |
| Next ₦500,000 (₦600,001 - ₦1,100,000) | 11% |
| Next ₦1,600,000 (₦1,100,001 - ₦2,700,000) | 15% |
| Next ₦3,200,000 (₦2,700,001 - ₦5,900,000) | 19% |
| Next ₦11,000,000 (₦5,900,001 - ₦16,900,000) | 21% |
| Above ₦16,900,000 | 24% |
Example: If an employee earns ₦1,200,000 per year, the first ₦300,000 is tax-free. The next ₦300,000 is taxed at 7% = ₦21,000. The next ₦500,000 at 11% = ₦55,000. The remaining ₦100,000 at 15% = ₦15,000. Total tax = ₦91,000 per year or about ₦7,583 per month.
Use our free PAYE tax calculator →
2. VAT (Value Added Tax)
VAT is a 7.5% tax charged on goods and services in Nigeria. Every registered business must charge VAT on its sales and remit it to FIRS monthly.
How to Calculate VAT
VAT = Invoice Amount x 7.5%
Example: If you sell goods worth ₦100,000, the VAT is ₦100,000 x 7.5% = ₦7,500. The customer pays ₦107,500 in total.
VAT Exemptions
- Basic food items (rice, yam, bread, etc.)
- Medical supplies and pharmaceuticals
- Educational materials
- Books and newspapers
3. WHT (Withholding Tax)
WHT is an advance tax deducted at source. It applies to payments made to contractors, suppliers, and service providers. The rate depends on the type of transaction.
WHT Rates
| Transaction Type | WHT Rate |
|---|---|
| Contractors (individuals) | 5% |
| Contractors (companies) | 10% |
| Rent | 10% |
| Consultancy | 10% |
| Professional services | 10% |
| Commission and brokerage | 10% |
Example: If you pay a contractor ₦500,000 for a project, you deduct 5% (₦25,000) as WHT and pay the contractor ₦475,000. You then remit ₦25,000 to FIRS.
4. When to File and Remit
- PAYE: Deducted monthly, remitted by the 10th of the following month
- VAT: Filed and remitted monthly by the 21st of the following month
- WHT: Remitted within 30 days of the transaction
Free Tax Calculator Nigeria
YMOBooks includes a free online tax calculator for PAYE, VAT, and WHT. Built specifically for Nigerian businesses and tax bands.
Use Tax Calculator →Penalties for Non-Compliance
FIRS charges penalties for late filing and remittance. VAT late filing attracts 5% per month plus interest. PAYE late remittance can result in fines and even prosecution. It's important to file on time.
Conclusion
Understanding Nigerian taxes doesn't have to be complicated. Use the right tools to calculate and track your tax obligations, and always file on time. YMOBooks includes built-in tax calculation to make this easier for you.