The deadline for filing annual PAYE returns is approaching, raising concerns for employers about ensuring full compliance under Nigeria’s updated tax framework.
In a media interaction today, the Special Adviser to the Acting Chairman of the Lagos State Internal Revenue Service (LIRS), Tokunbo Akande, clarified filing obligations, addressed concerns over penalties and tax identification, and cleared up common misconceptions about the new tax regime.
Why is January such an important month for employers of workers in terms of personal income tax compliance?
January is important because employers of workers must file their annual PAYE return immediately after the end of the previous year. This filing reports what happened over the past year: how much compensation was paid, taxes withheld, and taxes forgiven.
Also read: Youth, small investors exempted from capital gains tax on equities – Oyedele
Unlike individual taxpayers, who have until March 31, employers must start filing January 1, making January the statutory compliance window.
Who qualifies as an employer of labour, and does this obligation still apply if PAYE has been deducted and paid monthly?
Employer of labor includes any person or organization that compensates natural persons for services provided. This includes full-time employees, temporary workers, contractors, consultants and vendors.
Even where PAYE has already been correctly deducted and remitted monthly, the January filing obligation still applies; It's about reporting and resolution, not extra payments.
Employers are required to report who was paid during the year, how much each person was paid, the amount of tax deducted and what was ultimately sent to the tax authority.
What key information must be included in an employer's annual return, and does it include both current and exited employees?
The annual return covers both current and exited employees, including those who worked for the employer even for only one month in the previous year.
Employers are required to report the names of all employees, contractors and vendors paid during the year, along with their tax identification numbers (Tax IDs), gross compensation paid, taxes deducted and the net amount ultimately paid.
Proof of tax remittance must also be provided. Exited employees are not excluded from this process because the purpose of the filing is to capture historical transactions for the year under review rather than reflect the employer's current workforce.
How can employers file these returns, and what platform has LIRS provided to make the process seamless?
All tax filings are now completely electronic, as manual filing was discontinued in 2022. Employers can submit their returns online through the LIRS e-Tax platform at etax.lirs.net using phone, laptop or desktop.
Those who need assistance can also apply to any LIRS office, where dedicated officers provide free assistance to taxpayers. In addition, LIRS operates a helpdesk line, 0700-CALL-LIRS (0700-2255-4477), and an escalation system to resolve technical issues that may arise.
Also read: Raven says misunderstanding over tax reforms is biggest risk to Tinubu's administration
There are also plans to introduce USSD-based filing to further expand access and ease compliance.
What is the submission deadline, and are there penalties for late or non-filing even if PAYE payments are up to date?
Yes, the penalty applies even where PAYE has been paid in full. Failure to file carries an initial penalty of N100,000, with an additional N50,000 charged for every subsequent month of default until the filing is completed.
In addition to these financial sanctions, non-compliance also involves reputational risk, especially for organizations that place high importance on corporate integrity and maintaining a strong regulatory position.
What assistance and guidance is available to employers who are experiencing challenges with their filing?
LIRS offers several support channels to assist taxpayers in compliance, including free in-person filing assistance at all of its offices, telephone assistance through its call center, and online guides and publications that explain filing requirements in detail.
There is also an internal escalation mechanism to address unresolved issues. Taxpayers are strongly encouraged to seek clarification promptly rather than filing late, as timely support can help prevent errors and penalties.
What are the new tax laws that just came into effect?
The new tax laws represent sweeping changes to Nigeria's tax structure, aimed at protecting low-income earners, supporting small businesses and making compliance cheaper and easier for taxpayers.
They are also designed to promote fairness by more closely linking tax obligations to the ability of individuals and businesses to pay.
These reforms are among the most fundamental fiscal changes undertaken in Nigeria since independence.
Why was this tax reform considered necessary at this time?
Many previous laws were outdated, with penalties that did not reflect economic realities. Sometimes, non-compliance was cheaper than compliance, thereby inadvertently encouraging default.
The new laws reduce compliance costs, increase penalties for non-compliance, and modernize tax rules to reflect inflation and current economic activity.
Also read: Nigerian tax reform in simple language: What it means for MSMEs and individuals
Personal income tax rates are now more progressive. Should high income earners be worried, and will this discourage entrepreneurship?
No, data analysis conducted by LIRS on the records of more than 1.5 million anonymous taxpayers shows that 54.5 per cent of taxpayers will not pay tax at all, while 43.9 per cent will pay less than before, and only 1.6 per cent will see their tax burden increase.
Even for high income earners, tax rates are low by international standards. Overall, the reforms are expected to boost disposable income for most workers, stimulate consumption and business growth, and support long-term revenue sustainability.
There is confusion regarding tax identification numbers. Which should be used: LIRS Taxpayer ID or Joint Board of Revenue (JTB) Tax ID?
Nigeria is transitioning to a single, unified tax identification number under the Joint Tax Board (JTB Tax ID) system. During this transition period, existing LIRS PAYE IDs will remain valid and recognized, as all existing identifiers are being mapped to JTB Tax IDs.
For now, taxpayers can use any ID, but once the migration is complete at the end of the year, only the unified JTB Tax ID will be visible and in use throughout the system.
Under the new tax law, which categories of individuals are exempted, and are exempted individuals still required to file annual returns?
Exempt persons include persons earning the national minimum wage or less, as well as those whose chargeable income after allowable deductions is below the prescribed limit.
Small and medium-sized enterprises are also exempted where their turnover does not exceed N100 million, and their net worth is N250 million or less.
However, even where no tax is payable, record keeping and filing obligations may still apply, particularly to avoid the application of estimated tax.
There is a growing perception that every bank transfer should have a detailed explanation to avoid tax problems. What exactly should taxpayers do?
Detailed description of transactions is encouraged primarily for record-keeping purposes, not because every transfer is subject to tax. The tax authority is primarily concerned with income earned and profits above the statutory limits.
Taxpayers are therefore encouraged to keep proper records, formalize their operations, and maintain a clear separation between personal and business finances.
Failure to keep accurate records can expose businesses to estimated tax, while proper documentation compliance helps protect taxpayers.
Also Read: How to declare multiple income streams for proper taxation
What is the main message of LIRS to employers of workers under NTAA 2025 regarding timely and accurate January annual filing?
There is nothing to fear from new tax laws. Employers are encouraged to ignore misinformation, file their returns early, ensure accurate compliance and seek clarifications whenever needed.
Under the new framework, compliance is rewarded, non-compliance is penalized, and assistance is readily available to assist taxpayers throughout the process.
