Pay-As-You-Earn (PAYE) is a provision under the personal income tax act, 2004 (amended), and it is the taxation of income of individuals derived from employment. This income includes salaries, wages, bonuses, allowances, and benefits in kind.

A Pay-As-You-Earn Scheme is a tax assessment system that is designed to make it simple to collect taxes from taxpayers who are employed. The Personal Income Tax Act and the Operation of Pay-As-You-Earn (PAYE) Regulations, which were created in accordance with the Personal Income Tax Act’s requirements, both govern this Scheme.

The personal income tax laws in Nigeria have changed over time, and various adjustments have been made to better reflect the income of Nigerians. The most recent modification was made in 2012 when the Goodluck Jonathan Administration put into law an Amended Personal Income Tax Act, which did away with some contentious provisions in favour of a simpler and more straightforward definition of taxable income.

Paying your Pay-As-You-Earn tax

According to the Pay-As-You-Earn Regulations, an employer must register with the appropriate tax authority in order to withhold income tax from its employees, whether or not the relevant tax body officially notifies or directs them to do so. This demonstrates that voluntary compliance is contemplated under the Regulations.

The Regulation also requires that an employer must withhold tax from its workers and pay it to the appropriate tax office within six months after the start of operation as an employee. 

Additionally, for PAYE reasons, the employer is required to keep track of all deductions made from employee salaries. The regulations require employers to pay the deducted taxes to the appropriate tax authorities through the nearest tax office or authorized bank within ten days of the end of each month. There must be a receipt obtained and properly kept.

Every employer is required to submit PAYE tax returns on behalf of each employee to the appropriate tax authorities in the authorized format. Each employee’s total earnings for the year, any tax relief received, and the total amount of tax withheld from their pay should be included in the form. 

Employers that improperly deduct taxes or fail to properly account for such deductions are in violation of the law and subject to a fine of the whole amount of taxes owed plus 10% each year if found guilty. 

Ogun State Internal Revenue Service

The Ogun State Board of Internal Revenue Law, which also establishes the Ogun State Internal Revenue Service as the board’s operational arm, establishes the Ogun State Board of Internal Revenue. This is the body that accepts tax payments from Ogun state citizens.

The Ogun State Board of Internal Revenue Law grants the following authorities to the Board of Internal Revenue:

• establishing broad policy parameters for the Internal Revenue Service’s duties and directing how they are put into practice.
• ensuring the efficient and successful collection of all taxes, levies, and fines owed to the state government in accordance with applicable federal and state laws.
• executing all actions considered appropriate and required for the assessment and collection of revenue.
• Accounting for all funds thus obtained in a way that the Governor will specify.
• Providing the Joint Tax Board with suggestions on tax policy, tax reform, tax registration, tax treaties, and exemptions as necessary from time to time.
• Other matters that, in the Board’s judgment, are required to guarantee the Internal Revenue Service’s effective fulfilment of its legal obligations. 

How to calculate your Pay-As-You-Earn (PAYE) taxes for your employees in Ogun State

All states in Nigeria, including Ogun State, use the Pay-As-You-Earn (PAYE) method to determine an employee’s personal income tax. The tax is known as PAYE. The tax percentage increases from 7% to 24% of taxable income. A year’s worth of taxable income is between NGN300,000 and NGN3.2 million.

The following rates will be applied: 

a. 7% for the first N300,000; 

b. 11% for the next N300,000; 

c. 15% for the next N500,000; 

d. 19% for the next N500,000; 

e. 21% for the next N1,600,000; 

f. 24% for amounts beyond N3,200,000.

In conclusion, bear in mind that there are no longer any tax or Pay-As-You-Earn deduction requirements for employees whose monthly earnings do not exceed the national minimum wage, which is presently NGN 30,000 (PAYE).