What is PAYE?
Pay-As-You-Earn is known as PAYE. You typically pay tax through PAYE if you’re an employee.
It is a type of tax that ensures that an employer complies with the Fifth Schedule of the Income Tax Act requirements and deducts tax from his/her employee’s salary according to the guidelines set forth in that schedule (section 56).
The Pay-As-You-Earn system of withholding is the name given to this type of withholding. Compensation consists of:
- Wages, bonuses, and allowances;
- Payments via commission, pension, or lump sum;
- Commutation of sums owed under an employment contract; and
- A worker’s non-cash benefits. These non-cash benefits include the costs the employer expended on the employee’s behalf such as school costs, utility bills, motorized vehicles, Housing, Furniture and accessories, Loans with low-interest rates and interest-free periods, shares with a value below market value and any further form of reward.
How does the Nigerian Pay-As-You-Earn System operate?
Nigeria uses the Pay-As-You-Earn (PAYE) mechanism to determine an employee’s personal income tax. This tax is known as PAYE. From 7% to 24% of an employee’s taxable income is subject to this tax. Between NGN300,000 and NGN3,00,000 is the taxable income range.
The main law governing employee taxation in Nigeria is the Personal Income Tax (Amendment) Act, 2011 (PITAM). Nigerian employees pay taxes dependent on where they live. Therefore, if an employee works in Nigeria, they must pay taxes (full or part-time).
Other criteria for paying the Pay-As-You-EARN TAX In Nigeria are:
- The company is based in Nigeria.
- The employee resides permanently in Nigeria.
Non-residents are frequently excluded from paying taxes in Nigeria. However, assuming the following circumstances are true:
- The employee resides in Nigeria;
- The employee pays the employee’s costs;
- The employee may be subject to tax in Nigeria.
- The employee stays in Nigeria for more than 183 days in any 12-month period.
- The employee did not pay taxes to another country.
Note: Foreign nationals who reside in Nigeria are also required to pay income tax on their worldwide income.
Procedures involved in filing Pay-as-You-Earn tax
The government has made it such that citizens of Nigeria can now file their pay-as-you-earn tax from the comfort of their homes or offices through an online platform.
At www.firs.gov.ng/e-Services/e-TaxPayment, taxpayers can electronically pay and file state taxes, including PAYE and others, from the convenience of their offices or homes. Also, statutory deductions can be submitted online by employers on behalf of employees.
Audits of corporate income tax (CIT) are now completed in 63 days.
On the e-filing website at www.firs.gov.ng/e-Services/e-Filing, a streamlined single schedule for each tax category is accessible.
The typical time taken to file and pay taxes has now been cut by more than 50%.
introduction of online tax filing and payment.
The five (5) procedures listed below should be followed to create a bill reference on eTax.
Step 1: First, go to https://etax.lirs.net.
Step 2: For registered users only, enter your Payer ID and password to log in. In order to access the web portal, new users must register.
Step 3: Decide on the type of revenue and submit the PAYE and withholding tax schedule.
Step 4: Create a bill reference
Step 5: Pay using any available payment method and provide the bill reference.
The bill reference on the eTax site should be the only source of bill references for all taxpayers and consultants moving forward. Taxpayers can get assistance from the LIRS support team by calling (+234) 0700 2255 5477 or sending an email to [email protected].
For submitting PAYE taxes, Nigeria has a number of locations. There are several locations in Lagos where citizens may file their taxes. We’ll share where in Ikorodu, Lagos State’s internal revenue system, you may file your PAYE tax for the purposes of this post which is 19, Ikorodu Tax Office, 51, Lagos Road, Ota Ona, Ikorodu.