PAYROLL TAX is a personal income tax imposed on employers or employees, and are usually calculated as a percentage of the salaries that employers pay their staff. All employers in Nigeria are mandated by law to deduct a portion of their employees’ salary as tax under the Pay As You Earn (PAYE) scheme. Pay As You Earn (PAYE) is a method of collecting personal income tax through deductions from employees’ salaries and wages as provided by the section of Personal Income Tax Act (PITA) that is applicable. Every month a portion of their salary should be deducted as tax leaving them with a net salary as take home.
Taxes under the PAYE scheme fall under the jurisdiction of the State Inland Revenue Service, meaning that all the taxes are to be remitted to the state of your residence.
WHEN TO REMIT PAYE
Monthly payments of Pay As You Earn (PAYE) tax liabilities are to be made by all Employers on or before the 10th day of the month following the month the deductions occured.
Tax Relief:
Every taxable person is entitled to relief according to the payroll tax law.
Consolidated Relief: Consolidated relief is a portion of the income of an employee that will not be assessed to tax, or the amount that is tax exempted. Income earners are entitled to N200,000 + 20% of their gross income which is not taxable. Minimum Tax provision of 1% is charged on the Gross Income if after granting the Consolidated Relief Allowance (CRA) plus 20% of the Gross Income, there is no tax payable or the tax payable is less than 1% of the Gross Income, then the minimum tax will apply.
TAXES EXEMPTED
The legal Tax Exemptions available for the payroll taxes are as follows;
- Pension deductions,
- National housing fund deductions
- Gratuity payment
- NHIS (National Health Insurance Scheme)
- Life Assurance
PAYROLL TAX RATE
After the tax allowance and exemptions have been granted, the balance of a taxpayer’s income is taxed on the following scale according to the personal income tax (Amendment) act 2011:
- 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%.
You can learn more about the above from us at INCE Consulting Limited, it is our responsibility to be of immediate assistance to any Organization to advise them on how best to manage all their business issues with little or no disruption to their business operations.
Contact us at info@inceconsulting.com or +234 (0) 803 876 7883 to get expert help because we are the best business support service partner you can get.
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