Frequently Asked Questions

What is Personal Income Tax (PIT)?
Personal income tax is a type of tax imposed on the income of individuals who are either in employment or are running their own private businesses under a business name, a trust or partnership and trades. PIT is divided into two(2) Pay-As-You-Earn (PAYE) Direct Assesment (Self employed)
Who pays personal income tax and how?
All persons who earn income be it on a temporal or permanent basis; whether employees or individuals that carry out business activities are required to pay personal income tax. Tax due and payable by employees by reason of their employment, otherwise known as PAYE, should be deducted by their employers and remitted to the relevant tax authorities. On the other hand, the self – employed are required to assess themselves, file their returns and make payment on annual basis to the relevant tax authorities.
What is Direct Assessment?
Direct Assessment is an assessment raised directly on self-employed persons (eg. Traders,Professionals, Contractors etc). Without notice or demand, a self employed person will file a return of income earned in the preceding year using Tax Form A.
What is P. A. Y. E ? Section 81 PITA (Amended) 2011
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 for remittance to appropriate or relevant Tax authorities. It is a method of paying income tax.
Who is to pay P. A .Y .E?
Any individual who is in paid employment qualify to pay PAYE. Its mainly for people in an organized sector be it public or private institution.
Relevant Tax Law Guiding P. A .Y.E
The relevant law guiding the operation of P.A.Y.E is the Personal Income Tax Act (PITA) 2011 (S.81 of Personal Income Tax Act Cap P8 LFN 2004) and other sections of the schedules and regulation of the Act.
Commencement of P.A.Y.E scheme
The employer must within six months of commencing a business, register with relevant tax authority and deduct tax from emoluments of his employees and remit the amount so deducted to any of designated collecting banks in the state. The employer is an unpaid agent of government for the collection of PAYE.
Where an employee works under the supervision or management of a person who is not his employer, that person (hereinafter referred to as the “manager”) must furnish the particulars of the employee’s emoluments to the Tax Office nearest to the company and the manager must deduct the tax due from the employee’s emoluments and remit same to any of the designated collecting banks.
Within ten days of the end of every month, an employer must pay all deductions made from his employees as well as all other taxes due to the nearest tax office or to any of the aforementioned designated banks.
Registration requirements
The registration requirements are as follows: a) A copy of certificate of incorporation or business name registration b) List of staff and their annual salaries. c) The Directors’ Tax Clearance Certificates (now Electronic Tax Clearance Certificate) d) Letter of application for registration. Upon completion of registration, an Employer’s Identification Number will be issued.
Category of Income Chargeable to tax Section 3 PITA, 2011
Basic Salary
Housing Allowance
Transport Allowance
Meal Allowance
Utility Allowance
Entertainment Allowance
Leave Allowance
Compensation, bonuses, premiums etc.
13th Salary
Benefits in Kind
Other Allowances
Statutory Allowable Deductions (Schedule VI PITA, 2011) Amended
The sixth schedule of PITA, 2011 (Amendment), listed the following as tax exempt:
1. National Housing Fund contributions.
A Nigerian worker in both the public and the private sectors of the economy shall contribute 2.5 % of his basic monthly salary to the Fund.
2.National Health Insurance Scheme contributions.
Under NHIS , Federal Government employer and employee shall both bear 5% contribution to the scheme. Federal employer to bear 3.25% & 1.75% representing contribution from the employee’s consolidated salary.
While that of private establishment employer & its employees shall both bear 15%. 10% from the employer and 5% from the employee’s basic salary. However, the employer may decide to bear the whole of the contribution depending on the operating policy of the organization.
3. Life Assurance Premium:
This depend on the policy in operation by the organization.

4. National Pension Scheme:
A Pension contributory scheme is a scheme designed to ensure employees derive the benefit of being paid their pension adequately and as when due upon retirement. The Pension Commission regulates the fund. In the past rate was 15%, split evenly between the parties i.e the employer & the employee.
The current rate is 18% – Nigeria 2014 Pension Reform Act. This is to be borne by both the employer 10% and employee 8% of Basic Salary, Housing allowance & Transport allowance.

5. Gratuities:
This is computed on bases of the employee’s grade level, step and basic salary at the point of exit from active service.

Note that the above exemptions are subject to verification and evidences for informed judgment

How do I calculate my Tax ?
Add your income from all sources, less the consolidated relief/allowance (200,000.00 + 20% of gross income). “The balance is to be taxed after removing all statutory deductions applicable to such taxpayer as listed below: • Contribution to Pension • Contribution to National Housing Fund • National Health Insurance Scheme • Life Assurance Premium • Gratuities The balance is taxed using the following method:
first 300,000.00 @ 7%
Next 300,000.00 @ 11%
Next 500,000.00 @ 15%
Next 500,000.00 @ 19%
Next 1,600,000.00 @ 21%
Above 3,200,000.00 @ 24%
The tax as computed above is compared to a minimum tax of 1% of Gross Income; whichever is higher is the tax payable.
Penalty for Non deduction/non remittance of P.A.Y.E Section(74)
An employer who fails to make proper tax deduction or fails to account properly for deductions made commits an offence and is liable on conviction to a penalty of the total sum of taxes due and 10% per annum thereon. Employer are also liable to interest and penalty for late or non-remittance at CBN prevailing rate.
Due date for PAYE remittance – Section 77 PITA 2011
PAYE deducted is expected to be remitted to the relevant tax authority latest by the 10th day of the following the month of deduction.
Penalty for late remittance of PAYE
10% penalty of the amount due plus interest at commercial rate per annum for failure to remit the tax.
When and How to file Returns
Annual Returns Section 81(2)
Every employer shall be required to file a return with the relevant tax authority of all emoluments paid to its employees, not later than 31st January of every year in respect of all employees in its employment in the preceding year.

Monthly Returns Section 41
Employers are expected to submit their monthly staff payroll schedule at the point of remittance for that particular month. This is to enable us verify the current status of tax payers and also to straighten the records with us. This is Strictly done on monthly basis on or before 10th of the month following month of deduction.

Annual Tax Returns
Latest on 31st of January following the year of assessment.
This is very important, as it enable tax authorities to verify whether the correct and accurate taxes have been paid and remitted. In addition it makes processing of Tax Clearance Certificate (TCC) easy for the entire staff and it tells on the integrity of the management.

Penalty for failure to file Annual returns – Section 81(3)
Penalty of N500,000 for failure to file on or before 31 January of the following year.

What is Tax Clerance Certificate (TCC)?
Tax Clearance Certificate (TCC) is an official certificate issued to a taxpayer for tax assessed on the income of the taxpayer for the three years immediately preceding the current year of assessment. Of note is the fact that the payment of current year tax shall not be made a condition for the issuance of the certificate unless the applicant is leaving the country finally.
Is the TCC obtained in one state valid in other states?
Yes, TCC obtained in any state is valid in any part of the country.
Period of issuance of TCC
The TCC is expected to be issued within 2 weeks of application by the tax payer and it shows that the taxpayer has been cleared of all the tax liabilities for the past three (3) years preceding the current year of assessment. Where the TCC is not issued within 2 weeks period, a notice of refusal is issued to the taxpayer.
What information is on TCC?
The TCC contains information on taxpayer for the past 3 years as follows: 1. Chargeable Income 2. Tax payable 3. Tax paid 4. Tax outstanding or alternatively a statement to the effect that no tax is due 5. Taxpayer Identification Number
Requirement for issuance of TCC to PAYE (Taxpayers in Employment)
An idividual requesting for TCC is expected to do the following:
1. Typed application letter stating purpose for the TCC.
2. Payslips/salary schedules one in the first and last quarter of the three years of assessment (i.e. two for each year of assessment)
3. Salary Account.
4. Photocopy of staff ID card.
5. One passport.
6. Execution of Assessment Data Form (duly stamped by the officer in charge).
7. Letter of Introduction from your organisation.
Requirement for issuance of TCC for Enterprises
1. Typed application letter stating purpose for the TCC
2. Bank statement for the past three (3) years preceding the current year of assessment e.g from
January 2015 – December 2017.
3. Photocopy of valid means of identification
4. One passport photograph
5. Execution of form A
6. Certificate of registration from CAC (if applicable)
Uses of TCC
The transaction specifically mentioned in the Act which requires the production of TCC are:
(a) Application for Government loan for industry or business;
(b) Registration of motor vehicle;
(c) Application for firearms licence;
(d) Application for foreign exchange or exchange control permission to remit funds outside Nigeria;
(e) Application for certificate of occupancy;
(f) Application for award of contracts by Government, its agencies and registered companies;
(g) Application for approval of building plans;
(h) Application for trade licence;
(i) Application for transfer of real property;
(j) Application for import or export licence;
(k) Application for agent licence;
(l) Application for pools or gaming licence;
(m) Application for registration as a contractor;
(n) Application for distributorship;
(o) Confirmation of appointment by Government as chairman or member of a public board, institution, commission, company or to any other similar position made by the Government;
(p) Stamping of guarantor’s form for a Nigerian passport;
(q) Application for registration of a limited liability company or of a business name;
(r) Application for allocation of market stalls;
(s) Appointment or election into public office.
(t) For change of ownership of vehicle by the vendor;
(u) Application for plot of land; and
(v) Any other transaction as may be determined from time to time.
What is Withholding Tax?
It is an advance payment of income tax in favour of the tax payer.
Once a withholding tax is deducted at source on behalf of a tax payer, a credit note is available to that tax payer and such a tax payer can use the credit note to offset his/her income tax liability in future periods.
How Does it work?
If a contractor or supplier is to be paid for job or supply carried out, the entity making payment is expected to deduct or withhold 5% or 10% depending on the type of activity carried out, such deduction is to the benefit of the contractor / supplier and evidenced by a credit note which can be used to offset his/her income tax due in the relevant year of assessment.
What is a WHT credit note?
It is a document issued by the relevant Tax Authority showing that a taxpayer has suffered tax deduction at source.
Who Has the Responsibility to Demand Withholding Tax Credit Note?
The person who deducted and remitted the WHT is saddled with the responsibility of obtaining the WHT credit note on behalf of the contractor/supplier.
What Effect Does A Withholding Tax Has on Income Tax?
When a WHT tax is deducted at source, it is regarded as an income tax paid in advance. At the time of payment of income tax, the taxpayer is expected to aggregate the WHT credit notes and net off from the income tax due. For example: if total WHT credit note is N120,000, total income tax due is N200,000, the balance due to government is (N200,000-N120,000) =N80,000. Instead of paying N200,000, the taxpayer only pays N80,000. Therefore, collecting and keeping your WHT credit note safely is key.
Which Relevant tax authority collects WHT?
If you are an individual or enterprise, the relevant tax authority where your WHT should go is the State Internal Revenue Service (SIRS), whereas, if you are a Limited Liability Company, the relevant tax authority is Federal Inland Revenue Service (FIRS).
Who are the agents of WHT?
I. Corporate bodies companies
II. Individuals, firms and sole traders.
III. A statutory body, public authority and other institutions or organizations.
IV. Government ministry, departments or agencies and local governments.
How Do You Identify A Genuine WHT Credit Note?
If you are given a credit note, look out for the following features:
• WHT credit note number on top right corner
• Date of transaction including the nature of the transaction
• Name of the payer (if paid in the name of the person or company that deducted the money using his tin number, then his name will appear on the credit note, but if it is paid in the name of the contractor using the contractor’s tin, then the name of the contractor should appear on the credit note).
• The name of the beneficiary (if paid on behalf of the contractor using the payer’s TIN , the name of the payer will differ from the name of the beneficiary, but if paid in the name of the contractor using the contractor’s TIN, then the name of the payer will be same with name of beneficiary.
Circumstances Under Which WHT Cannot Be Deducted
• WHT is mainly for transactions involving contract of purchase, it means that direct labour does not attract WHT
• WHT cannot be deducted in the ordinary course of business, except it involves contract. For example, if you enter a shop to buy a product, you cannot deduct WHT, but if i ask you to supply the product with a contractual agreement, then WHT must be deducted.
What is Consumption Tax?
This is a tax on consumable goods and services (in hotels, restaurants, event centre etc). it is backed by law enacted by Kogi state House of Assembly which imposes tax on goods and services consumed in Hotels, restaurants, events centre and other related outfit in Kogi State.
Who pays Consumption Tax?
Section 3 of the law hereby imposed this tax on any person who;
(a) Pay for the use or possession or for the right to use or possession of any hotel, hotel facility or event centre; or
(b) Purchase consumable goods or services in any restaurants within the state.
Consumption and Services Taxable
The amount to which tax applies is the total cost of facilities, consumables or personal services supplied to a customer in or on behalf of the Hotels, Restaurants or event center.
What is the rate on Consumption Tax?
The rate of tax imposed by section 3 of this law shall be 5% of the total cost of the facilities, consumables or personal services supplied to the person who makes use of the hotel, restaurants, event centre or hotel facility
Who are collecting agents?
Any person who:
(a) Owns operates or manages any Hotel, Hotel facility or event centre, or
(b) Supplies any goods and services chargeable under Section 3 of this law shall be the agent for collection of the tax and on behalf of Kogi State Government
How to Register / Registration
Every owner, operator, manager of any Hotel, restaurant, hotel facility or event centre or supplier of any goods or services affected by this law shall register within thirty days of the commencement of any business or services cause to be registered with the Board (section 10)
Effective date of payment and collection of 5% Consumption Tax in Kogi State
Effective date of payment and collection of 5% Consumption 1st July, 2016
What is the reporting period?
A calendar month shall constitute a reporting period. Returns of collections must be prepared and forwarded to the tax authority at the end of the month in the prescribed forms.
How to remit taxes collected
Taxes collected by facilities (collecting agents) in a particular month are to be remitted to the tax authority on or before 20th of the next or following month through designated bank accounts on a preceeding basis.

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