A taxpayer is required to file returns for the preceding year within 90 days of the end of the year.
Monthly payments of Pay As You Earn (PAYE) tax liabilities are to be made on or before the 10th day of the month following the applicable month (e.g. January tax to be remitted by 10th of February).
The employer has the duty to deduct PAYE and remit to the tax authorities on a monthly basis.
The tax rate for PAYE is applied on a graduated scale as shown below:
- First N30,000 at 5%
- Next N30,000 at 10%
- Next N50,000 at 15%
- Next N50,000 at 20%
- Above N160,000 at 25%
Personal Income Tax Reliefs
The following reliefs are available to a taxpayer under the PAYE system and are deducted from his emoluments before arriving at the taxable income:
Personal Allowance N5,000 plus 20% of earned income*
Child Allowance A relief of N2,500 is granted for each child up to a maximum of four children, provided that none is above 16 yrs or married. However, a relief can be granted for a child over 16 yrs if he is in a recognised school, under articleship or learning a trade.
Dependent relative A relief of N2,000 is granted for each dependent relative up to a maximum of two
relatives who are widowed or infirm.
Housing Maximum of N150,000 per annum
Transport Maximum of N20,000 per annum
Meal Maximum of N5,000 per annum
Utility Maximum of N10,000 per annum
Entertainment Maximum of N6,000 per annum
Leave allowance 10% of annual basic salary
Reimbursables such as Medical, Car Maintenance and Cost of passage To the extent that expenses have been incurred and it is not intended that employee should make any gain.
*Earned income has been defined as the employees gross emoluments
Pension Any amount contributed by the employee to the pension scheme
The reliefs are claimable only upon application to the relevant Revenue authority by completing the required forms.
BIK provided to the employee by the employer are deemed to be part of such employees gross emoluments and include:
- where the employee uses an asset, such as an official car, owned by the employer, the employee is treated as being in receipt of a taxable emolument of 5% of the original cost of the asset;
- where the asset is hired or rented for the employee by the employer, the employee is treated as being in receipt of the amount paid to the landlord or the hirer; and in the case of provision of accommodation for an employee, the annual rate or rate-able value of the accommodation is taken as part of the employee's emoluments.
Penalties For Non-Compliance
Failure by the employer to deduct tax from the employee attracts penalty of 10% and Interest at commercial rate (currently 21%) along with the principal amount payable.
Rendering of incorrect/false returns attracts, on conviction, a fine of N200 and double the amount of tax undercharged.