How to calculate Pay-As-You-Earn (PAYE) taxes for employees in FCT Abuja

How to calculate Pay-As-You-Earn Taxes

An income tax known as the Pay-As-You-Earn (PAYE) tax is levied on every employee in Nigeria. It is required that everyone working in a paid employment be subjected to this tax monthly. Your employer is obliged to withhold Pay-As-You-Earn (PAYE) tax from each payment of your wage and send it to the Revenue. 

Pay-As-You-Earn is also referred to as PAYE. It is often how you pay taxes if you are an employee in Nigeria. PAYE is one of the personal income taxes levied on working-class citizens. This makes sure that the annual sums you must pay are evenly collected on each payday throughout the course of the tax year.

The Federal Internal Revenue Service is in charge of handling personal income tax administration in Nigeria. It is important to know that the PAYE (Pay-As-You-Earn) method of collecting personal income tax is used on the tenth day of every month. And it is called the PAYE tax.

People who get an occupational pension from a former employer are also tasked to pay their PAYE tax. You can learn more about the Nigerian PAYE tax and its calculation for employees in FCT Abuja from this article.

Important notes about Pay-As-You-Earn tax

  • The PAYE tax is determined per person.
  • The taxable income band’s currency is determined in Nigerian Naira.
  • Any salary, income, fee, bonus, gain, or other compensation that is paid to an employee is included in the employee’s gross income.

How to register with the FCT-Internal Revenue Service to file Pay-As-You-Earn taxes

To register, you need to utilize the list on to visit the FCT-IRS office that is closest to you.

For your registration, FCT-IRS will need a copy of the CAC certificate and a properly filled out non-individual tax registration form in order to construct a tax profile for a firm or company. It will be an appropriately filled-out individual tax registration form in the case of an individual, but if it is employee-based, it will be filled out collectively.

The Bank Verification Number and FCT-IRS Tax Identification Number of taxpayers are among the information requested on the application form. The registration papers also include appropriate places for listing prior Tax Identification Numbers given by FIRS. This should make sure that the platform of the FCT-IRS is updated with information about previous taxpayers.

Then the information for remitting tax will be sent by FCT-IRS after registration.

The second stage is your expected monthly tax returns: On the tenth day of the month after salary payment, Pay-As-You-Earn tax is payable. For instance, the tax on the employee’s July salary is due on August 10th. Also, the payment of income tax in advance is known as withholding tax (WHT). This WHT rate usually fluctuates between 5% and 10%.

How to calculate Pay-As-You-Earn (PAYE) taxes for employees in FCT Abuja

There are standard rates and fee observations for PAYE tax in Nigeria. The formula below can be used to determine the PAYE tax in line with Schedule 6 of the PITA.

Annual Taxable Income (NGN)RatesTax payable per annum (NGN)
First 300,0007%21,000
Next 300,00011%33,000
Next 500,00015%75,000
Next 500,00019%95,000
Next 1,600,00021%336,000
Above 3,200,00024%Multiply only the excess amount over NGN 3.2 million by 24%. For example, an annual taxable income of NGN 5 million is (5-3.2) million *24%= NGN 432,000.

Individual income taxes are not applied to those who are employed and make the minimum wage or less. This means that employees earning below the Nigerian standard minimum wage of 33,000 will not be taxed with this PAYE tax.

In conclusion, every employer must be aware that their employee’s tax returns must be submitted by the taxpayer by March 31st of each year. A 5,000 naira fine will be assessed for failure to file tax returns by this deadline.

The fine increases by ₦100 for each day that you are late. One can even get a prison sentence of 6 months if one jokes around with taxes.

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