As you must already be aware, the gross income for an employee under a contract is different from the monthly wage the person would actually earn at the end of the year. An employee’s net pay is calculated by subtracting additional costs from the gross compensation. Pay-As-You-Earn taxes are one of these charges. 

The question that comes to the mind of most business owners, employees, or contract workers when they hear this is what taxes do I pay as an employee, and where do I file such taxes? All of this information and more will be provided in this article. 

Taxes to pay as an employee in Nigeria

People who make their livelihood in Nigeria are subject to personal income tax. The Federal Internal Revenue Service is in charge of administering the Personal Income Tax. On the tenth day of every month, personal income tax is collected using the PAYE (Pay As You Earn) mechanism. The tax on this is known as PAYE.

What is a Pay-As-You-Earn tax?

Pay-As-You-Earn is referred to as PAYE. You typically pay tax through PAYE if you’re an employee. People who get an occupational pension from a former employer can also utilize PAYE. 

Your employer or pension provider will utilize this system to deduct your income tax and national insurance contributions before paying your salary or pension. This tax payment is deducted from each wage and the resulting sum is sent to the Revenue.

Pay-As-You-Earn makes sure that the annual sums you must pay are evenly collected on each payday throughout the course of the tax year. Your country’s tax law determines the amount you pay for PAYE tax.

Typically, the Pay-As-You-Earn tax is determined per individual. And the taxable income band is determined using the Nigerian Naira as its currency. 

How do I file for a Pay-As-You-Earn Tax in Nigeria?

1. Physical registration: Each state in Nigeria has different centres where people can file their taxes. Tax residents in Lagos State usually pay taxes to the Lagos State Internal Revenue Service (LIRS). The taxes and other levies payable to LIRS include PAYE tax, withholding tax, business premises levy, and development levy. The procedure for registering can be found here.
2. Online registration: With effect from August 1, 2022, the Lagos State Internal Revenue Service (LIRS) has released a new method of creating bill references to pay taxes in Lagos State. All tax payments must be made through the eTax portal, which renders all Other methods of acquiring bill references useless. Taxpayers and other stakeholders will find the payment processes and procedures easier.

Where do I file my Pay-As-You-Earn (PAYE) taxes with the Lagos State Internal Revenue Scheme (LIRS) in Victoria Island, Lagos in 2022?

The Lagos State Internal Revenue Scheme (LIRS) in Victoria Island is located at PLOT 707 Adeola Hopewell St, Victoria Island 106104, Lagos.

You can either walk into their office to begin the Pay-As-You-Earn tax filing procedures or register online.

Tax returns must be submitted by the taxpayer by March 31st of each year. A 5,000 yen fine will be assessed for failure to file tax returns by this deadline. The fine rises by 100 naira for every day you refuse to pay. If one plays around with taxes, one may even receive a 6-month prison sentence. 

Note: The bill reference on the eTax site should be the only source of bill references for all taxpayers and consultants. Also, taxpayers can get assistance from the Lagos State Internal Revenue Scheme support team by calling (+234) 0700 2255 5477 or sending an email to [email protected].

In conclusion, it is important that you pay your Pay-As-You-Earn tax as an employee or employer of labour to avoid paying the fine for defaulters.