Ideas & Insights
Paywings's perspective on Payroll & Related
please wait while we load
Personal Income Tax in Nigeria is a tax applied on all incomes of an individual employed by a business or organisation. Self employed individuals are expected to file annual returns annually and pay the taxes due.
A taxpayer is required to file returns for the preceding year within 90 days of the end of the year. A new tax payer can register as per the procedure mentioned here.
Direct Assessment Tax & Self Assessed Tax
Direct Assessment is used to assess tax for self employed individuals. With the self assessed tax, a new tax payer can assess him/herself, pay the calculated tax at designated banks and get an e-TCC (Tax Clearance Certificate) without visiting any tax office.
Pay As You Earn (PAYE) Taxes
All employers in Nigeria are expected to and responsible for deducting Pay As You Earn (PAYE) taxes from their employees’ pay. Taxes deducted are required to be remitted to the appropriate tax office by the 10th day of the month following the deduction.
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).
PAYE Taxes are calculated as follows:
After the relief allowance and exemptions (see blow) have been granted, the balance of a taxpayer’s income is taxed on a graduated scale as shown below:
– First N300,000 of income @7%
– Next N300,000 of income @ 11%
– Next N500,000 of income @ 15%
– Next N500,000 of income @19%
– Next N1,600,000 of income @ 21%
– Above N3, 200,000 of income @ 24%.
Personal Income Tax Reliefs
The Personal Income Tax Amendment Act of 2011 scrapped the old relief systems and increased relief for all taxable person(s). The amendment combined all reliefs into the Consolidated Relief Allowance (CRA), which combines all previous reliefs (Housing, Meal, Utility, Transport, Leave allowances, etc) into a single relief of N200,000 subject to a minimum tax of 1% of gross income (whichever is higher) plus 20% of the gross income.
Highlights of the amendment are :
– Consolidated Relief – N200,000.00 or 1% of gross Income whichever is higher
– Plus 20% of Gross Income
– Minimum tax payable is 1% of Gross pay.
Other Tax Exempt Items
In addition to the Consolidated Reliefs and Allowances (CRA) above, the following items are tax exempt and tax is calculated after amounts paid in respect of these items are deducted;
– National Housing Fund Contributions
– National Health Insurance Scheme
– Life Assurance Premiums
– Pension Deductions
Penalties For Non-compliance
The penalty for failing to file returns according to the Personal Income Tax (Amendment) Act, 2011 is N500,000 for corporate organisations and N50,000 for individuals.
For more information related to Income tax in Nigeria, contact
Old Secretariat Area I, Block G & H
P.M.B. 88, Garki, Abuja
Tel: 09-2341689; 2341491
(Opposite Central Bank)
P.M.B. 14, Garki, Abuja
Tel: 09-2340946; 2340324; 2343783; 2343784
2343786; Fax: 09-2340512
Ministry of Finance Complex
Block B, 2nd Floor Gadastral
Zone A3, Garki, Abuja
Tel: 09-2340939; 2635446