Nigerian Tax System: PAYE, Tax Evasion And Other Important Things You Should Know

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What is P. A. Y. E?
P. A. Y. E. is an acronym for “Pay As You Earn”. It is a method of collecting personal income tax from employee`s salaries and wages through deduction at source by an employer as provided by the relevant sections of Personal Income Tax Act (PITA). (S.81 of Personal Income Tax Act Cap P8 LFN 2004)

What is the due date for remitting PAYE?
The due date for remitting PAYE is 10th day of every month following month of deduction

What are the current tax rates applied on taxable income?
Answer The current rates applicable to the taxable or chargeable income are as follows:
1st N300, 000.00 @ 7%
Next N300,000.00 @ 11%
Next N500,000.00 @ 15%
Next N500,000.00 @ 19%
Next N1,600,000.00 @ 21%
Above N3,200,000.00 @ 24%


Where should PAYE deductions of staff working in Abuja but residing in Suleja or Mararaba be remitted to?
By residency rule, an employee’s PAYE is payable to the Tax Authority of his/her place of residence. It is therefore the duty of the employer to deduct and remit it to the Tax Authority where the employee is resident that is Niger State Internal Revenue Service or Nasarawa State Internal Revenue Service respectively.


When there is under deduction of tax in the employee’s income, who bears the burden of the under deduction?
When there is an under deduction of tax in staff salary, the staff whose tax is under deducted bears the burden.

What is Gross Emolument/salary?
Personal Income Tax Act (PITA) as amended defines Gross Emolument as the aggregate of wages, salaries, allowances (including benefits-in-kind), gratuities, superannuation and any other income derived solely by reason of employment.

What are non taxable deductions under PIT Act?
The sixth schedule of PITA as amended specifies the following as tax exempt. They are:
a) National Housing Fund contributions
b) National Health Insurance Scheme contributions
c) Life Assurance Premium
d) National Pension Scheme
e) Gratuities

What is Tax avoidance and Tax evasion ?
Tax Avoidance: - This is considered as a way of identifying the loop hole in the tax law and then taking advantage of such loop hole to reduce the tax payable

Tax Evasion: - This is a deliberate and illegal act of the taxpayer not to pay the correct tax

Source: Federal Inland Revenue Service