LECTURES ON PAY AS YOU EARN (P.A.Y.E.) AND WITHHOLDING TAX PRESENTED BY HAMMAN BALA IZGE DURING THE ONE DAY SENSITATION AWARENESS WORKSHOP ORGANISED BY THE ASSOCIATION OF LICENCED PRIVATE SECURITY PRACTITIONES OF NIGERIA (ALPSPN) ON THE 28TH JULY, 2016

Preamble- What is tax– Is a compulsory contribution paid by citizens to the government to support its social amenities.
What is personal income- is defined as the income of individuals, families, communities among others, eanred from trade, employment, business, profession or vocation.
What is personal income tax- is the tax imposed on the income of indidviduals who are either in employment or are running their own businesses under a business unit, trust or partnership.
All persons who eanr income, be it on a temporal or permanent business, whether employees or indidviduals that carry out business activities.

PAYE AS YOU EARN (PAYE) S.81PITA

  1. – A form of PIT payable by those in employment.
  2. – It is deducted at source .
  3. – Should be deducted by employers and remitted to the relevant tax authority.
  4. – Self-employed are requested to assess themselves
  5. – The amount so deducted to be remitted ot the relevant tax authority not later than 14th of the preceding month.
  6. – Penalty for fairlure to deduct and remit tax is 10% of the tax not deducted/remitted plus interest at CBN monetary policy rate–PITA S.70(1)
  7. – Any employment with five employees or more should make returns.

RIGHT OF TAXPAYER

  1. To know how to access his income to tax, when to pay and where to file returns and make payments.
  2. To demand for evidence of payment i.e. receipt or tax clearance certificate (TCC)
  3. To know what government does with the tax collected.
  4. To know when penalty and interest will be applied to you on fairlure to payment.
  5. To seek redress appeal or object to assessment raised or decision taken against you.

OBLIGATION OF TAX PAYER

  1. To assess correctly, file and make payments as and when due.
  2. To comply, with the relevant provision of the tax laws
  3. To disclose all sources of income for tax purpose.

GENERAL REQUIREMENT OF FILING AND PAYMENT OF TAX UNDER PITA

  1. An indidvidual engaged in full time employment is taxed under pay as you earn system.
  2. Employers withhold PAYE from the employee’s salary and pay to the relevant tax authority within 14days.
  3. Every individual employer must make returns unless his income does not exceed N300,000.00
  4. Other individuals pay tax by self assessment or direct assessment.
  5. Payment of tax may be made in full or in instalment if applied for and approved.

OBLIGATION OF AN EMPLOYEE

  1. To correctly fill and file relevant tax documents for each year of assessment as may be required by the relevant tax authority.
  2. Employee to correctly disclose all the source of his income for tax purpose.

OBLIGATION OF EMPLOYER

  1. To deduct at source correct amount of tax from salary payable to an employee each month
  2. To submit annual returns of all employees
  3. To verify and asceertain the returns form filled in by his employees
  4. To remit to the relevant tax authority the tax so deducted at least 14days in to the preceding month.

OFFENCES AND PENALTIES

  1. Sec. 52(1)(a) – fairlure to keep books of accounts N50,000.00 for individual and N500,000.00 for corporate.
  2. Sec. 70(1) – fairlure to deduct and remit tax – 10% of tax not deducted plus interest at CBN Monetary Policy Rate (MPR).
  3. Sec. 81(a)(3) – failure to file returns by employers N50,000.00 for individual and N500,000.00 for corporate.
  4. Fairlure by employer to deduct and remit tax of its employees, warrant sanction of denial of TCC.
  5. Sec. 94 – Fairlure to comply with any provision where there is no specific penalty, N5,000.00 on the first instance and N100.00 for every day.

WITHHOLDING TAX

– Is a tax deducted at the point the income is received or accrued to the beneficiary (taxpayer).
– It is deducted at source
– Reduce the incidence of tax evasion
– Amount so deducted is to be remitted to the relevant tax authority.
– Persons authorised to deduct tax at source include Government, Department, Parastatals, Statutory bodies, institutions, and other establishments approved for the operation of P.A.Y.E.

WITHHOLDING TAX ON RENT

PITA S.69 – Where a rent becomes dur or payable, the payer of the rent shall, at the date when the rent is paid or credited, whichever first occur, deduct therefrom the tax at a rate prescribed and shall forthwith pay over to the relevant tax authority where the land lord is resident.

  • When accounting for WHT so deducted to the relevant tax authority, the person making such deduction shall states in writing the following:
  1. The gross amount of the rent payable per annum
  2. The name and address of the recipient and the period covered by the rent.
  3. The address and accurate description of the property concerned
  4. The amount of tax being accounted for
  5. The rate is 10% per annum

WITHHOLDING TAX ON DIRECTOR’S FEES
PITA S.72 – Where any payment of director’s fees becomes due or payable to a person, the payer at the date when the payment is due or credited, whichever first occur, shall deduct therefrom tax at the rate of 10% and shall forthwith pay over to the relevant tax authority the amount so deducted.

WITHHOLDING TAX ON CONTRACT OF SUPPLIES

Contract of supplies is defined as all forms of deliveries or the like through competitive bidding, tender, LP.O and other similar arrangement whether oral or written.

S/N TYPES OF PAYMENTS RATE FOR LTD COMPANIES RATE FOR NON CORPORATE BODIES (INDIVIDUALS)
1 Divided, Interest, Rent and royalties 10% 10%
2 Commission and Director’s Fees 10% 10%
3 Consultancy, Technical and Management Fee 10% 5%
4 Construction, Building and related services 5% 5%
5 Contracts/Suppliers 5% 5%