It is Tax Season: How Does PAYE Tax in Nigeria Work?

It is Tax Season: How Does PAYE Tax in Nigeria Work?

It is that time of the year again, the time to file your Pay As You Earn, popularly known as PAYE, taxes with the State Inland Revenue Service (SIRS).

Every year, on or before January 31st, employers and self-employed individuals are mandated to file their PAYE for the previous calendar year.

So, what is this PAYE tax?

PAYE is a type of tax that self-employed individuals, employees and business owners pay to the State Inland Revenue Service (SIRS) in their state of residence.

Employers are required to deduct this tax from their employee's taxable income monthly and remit the funds to SIRS on/before the 10th of the following month.

Note: Not all income is taxable. Examples of non-taxable income include deductions to your pension fund and premiums on life insurance.

Also, some people are exempted from paying tax. Those earning the minimum wage of N30,000/month or less are not required to pay this tax.?

How do you calculate your PAYE?

The PAYE is a progressive tax which means that high-income earners pay more tax than low-income earners. The current tax rate ranges from 7% to 24%.?

To calculate your PAYE tax in Nigeria, please refer to the table below:

For example, a person earning N800,000 annually, will pay N84,000 in taxes or N7,000/month. This is 7% on the first N300,000 (N21,000), 11% on the next N300,000 (N33,000) and 15% on the next N200,000 (N30,000).

So why do I need to do this major filing on January 31st if I remit funds monthly??

Our teams change. Some people join the team, others leave. This process is an opportunity for employers to share the full breakdown of all their employees with the government as well as how much is remitted on behalf of each staff member.?

What happens if I did not remit my PAYE in 2023?

You should still file your taxes by January 31st. If not, you can be fined N500,000 in addition to the back taxes owed.

How can we help?

If you want more information or need help, contact us today at [email protected].