Pay As You Earn (PAYE) is a form of tax deducted by an employer from the employee's salaries and wages. This tax deduction is also known as Personal Income Tax, and is made based on the provisions of Section 81 of the Personal Income Tax Act (PITA) . PITA applies to every income that is received by an individual.
Employers must begin deducting tax from the salaries and wages of their employees after commencing payment. The deducted taxes are remitted to the Ekiti State Internal Revenue Service (EKIRS), which is the tax regulatory body for Ekiti State through any designated collecting bank or online channels. After payment has been made to the collecting bank or through online channel, the employer will take evidence of payment to its tax office. Your tax office should be the nearest tax office to your primary operating premises.
As an employer, you must ensure that PAYE is remitted to the EKIRS before the 10th of the month following the month when the deductions were made. E.G January PAYE must be remitted on or before February 10th. Note that contract employees and interns are not exempted from PAYE deduction. At the end of the year, employers are expected to file duly updated returns on all salaries and wages paid to the employees on their payroll within the preceding tax year. Returns must be filed at the employer’s tax office before January 31st for the preceding year. For instance, 2019 returns must be filed before January 31, 2020.
If you have read this far, the question on your mind is probably, “how much exactly is this PAYE?” Well, it depends. Lagos operates a graduating scale PAYE system. The tax rates increases based on the employee’s annual taxable income The scale used by the EKIRS is:
a. The first N300,000 will be charged at 7%;
b. The next N300,000 will be charged at 11%;
c. The next N500,000 will be charged at 15%;
d. The next N500,000 will be charged at 19%;
e. The next N1,600,000 will be charged at 21%;and
f. Then above N3,200,000 will be charged at 24%.
Where an employee’s annual taxable income is below the N300,000 threshold, then the appropriate tax rate will be 1%. So, for instance, where an employee makes N5 million a year, not all of the N5 million would be taxed at the maximum of 24%, but rather the first N300,000 of the N5 million would be taxed at 7%, the next N300,000 of the remaining N4.7 million will be taxed at 11%, the next N500,000 of the remaining N4.4 million will be taxed at 15% and so on until the maximum threshold is reached.
Failure to File Taxes
Not filing taxes is a criminal offence! Any employer who fails to make proper tax deduction or fails to account properly for deductions made is liable on conviction to a penalty of the total sum of taxes due. In addition, the employer will pay 10% annual interest for every year the taxes were not filed or improperly filed. Employers are also liable to penalty and interest for failure to remit and late remittance.
Direct Assessment is a Personal Income Tax which is imposed on self employed persons. This is usually applied to individuals who run their own small businesses.
Land Use Charge (LUC)
Land Use Charge (LUC): is an annual Property Tax that encompasses consolidation of Tenement Rate, Ground Rent and Neighbourhood Improvement Levy. LUC is payable in respect of all real estate property situated in Ekiti State with or without improvement on it. LUC is payable by the owner of the property, or lessee of property/ Tenant/Occupier- who looks up to the property owner for reimbursement from any money due to the property owner.
Any business premises in an urban and rural areas in Ekiti State is required to be registered on the payment of a fee in the first year of registration and subsequent renewals on yearly basis.
A type of tax levied on the profit from the disposal of an asset. Tax on gains that arise on the sale of capital assets, items such as land, buildings and shares.
Withholding Tax is an advance payment of income tax. In principle, WHT is a payment on account of the ultimate income tax liability of the taxpayer or company. The tax is normally to be deducted at source when a payment is to be made to the beneficiary. The residence of the taxpayer is generally not relevant for the purpose of determining liability to tax or the application of WHT, but it is important to consider whether the provider/supplier of the goods or services is liable to Nigerian tax. Types of payment applicable rates for individual Dividends, Interest, Rent 10%, Directors Fees 10%, Royalties 10%, Commission, Consultation, Technical, Service Fees 5%, Management fees 5%, Construction/Building Contracts 5%, Contracts, other than outright sales and purchase of goods in the ordinary course of business 5%.
Pool betting, lotto, online sports betting, lotteries, casino taxes and any other gaming applied to enterprises, companies and their agents operating within the state. The promoter of gaming enterprise is expected to pay registration and license fees, renewable annually. Agent of a gaming enterprise is expected to register with the State Internal Revenue Service. Different taxes applies to different gaming enterprise ranging from; weekly tax, tax on winnings, machine fees, etc.
All enquires that all written instruments, including where any property is transferred to any person, must be stamped and taxes deducted and paid to government. The State Government shall collect the duties in respect of instruments executed between persons or individuals at such rates to be imposed.
Households and business premises are required to pay a monthly levy for waste disposal and management.