PERSONAL INCOME TAX IN NIGERIA

In Nigeria, Personal Income Tax (the “PIT”) is a tax imposed by the government on the incomes of individuals who are either in employment or are running their small businesses, under a business name or partnership; communities, families, trustee or executor. The Personal Income Tax Act (the “PITA”) regulates the assessment, collection, and regulation of the tax. 

PIT Payers and Collection Authority

Despite that, the PITA is an Act of the National Assembly, the relevant tax authority in a State i.e. the State Inland Revenue Service shall have powers to collect the PIT from those liable to pay the PIT with exception to:

1. persons employed in the Nigerian Army, Navy, the Nigerian Air Force, the Nigerian Police Force other than in a civilian capacity;
2. officers of the Nigerian Foreign Service;
3. every resident of the Federal Capital Territory
4. a person resident outside Nigerian who derives income or profit from Nigeria.

The PIT of the respective above-listed persons is collected by the Federal Inland Revenue Service (the “FIRS”).

Except for itinerant workers, persons on whom tax is to be collected is expected to pay their income tax to the state in which they are deemed to be resident. In cases where an individual has more than one place of residence, its tax becomes payable to the state that is deemed to be its principal place of residence. However, an itinerant worker shall pay the PIT to the State where s/he is found during the year. An itinerant worker includes an individual irrespective of his status who works at any time in any state during a year of assessment (other than a member of the armed forces) in more than one state and for a minimum of twenty (20) days in at least three (3) months of every assessment year. In assessing the itinerant worker for tax for any year of assessment, credit should be given against any tax paid to other tax authorities for the same year of assessment.

Chargeable Income

The PIT shall be payable for each assessment on the aggregate amounts each of which is the income of every taxable person, for the year, from a source inside or outside Nigeria, including without restricting the generality of the following:

1. gain or profit from any trade, business, profession or vocation, for whatever period such trade, business, profession or vocation may have been carried on or exercised;
2. any salary wage, fee, allowance or other gain or profit from employment including compensations, bonuses, premiums, benefits, or other perquisites allowed, given or granted by any person to any temporary or permanent employee other than so much of any sums as or expenses incurred by him in the performance of his duties, and from which it is not intended that the employee should make any profit or gain;
3. gain or profit including any premiums arising from a right granted to any other person for the use or occupation of any property;
4. dividend, interest or discount;
5. any person, charge or annuity;
6. any profit, gain, or other payment not falling within paragraphs listed above. 

The PIT Payment Scheme

The PIT can be paid through any of the two below:

1. Pay-As-You-Earn (PAYE): Employed persons pay the PIT through the PAYE scheme. The PIT is deducted from the salaries or wages of the employee by the employer and remitted it to the relevant tax authority. The due date for remittance of PAYE is the 10th day of every succeeding month. The deadline for filing returns for PAYE is the 31st of January of the succeeding year.
2. Direct Assessment: For self-employed individuals, the PIT is paid through this scheme. The self-employed person will file a return of income earned in the preceding year and pay the requisite PIT to the relevant tax authority. The due date for filing returns and remittance is the 31st of March of every year.

The PIT Rate

Annual Taxable Income	Rate
First ₦300,000	7%
Next ₦300,000	11%
Next ₦500,000	15%
Next ₦500,000	19%
Next ₦1,600,000	21%
Over ₦3,200,000	24%

Offences and Penalties

1. Any person found guilty to have failed to comply with any regulation under the PITA with no specific penalty thereto, shall be liable on conviction to a fine of ₦5,000, and where the offence committed is the failure to furnish a return, statement or information or to keep records required, a further sum of ₦100 for every day during which the failures continues, and, in default of payment, to imprisonment for six months, and the liability to such further sum shall commence from the day following the conviction, or such other day thereafter as the Court may order. 
2. Any person who, without reasonable excuse makes an incorrect return by omitting or understanding any income to tax under this Act, or gives an incorrect information concerning a matter or thing affecting the liability to tax of any taxable person, is guilty of an offence and liable on conviction to a fine of ₦20,000 of the correct tax and double the amount of tax which has been undercharged in consequence of the incorrect return or information, or would have been so undercharged if the return or information has been accepted. 
3. A person whom to obtain a deduction, set-off, relief or an overpayment in respect of tax for himself or any other person, who is a return, account or particulars made or furnished regarding tax, knowingly makes a false statement or false representation; or aids, abets, assists, counsels, incites or induces any other person to make or deliver a false return or statement under the PITA; or to keep or prepare false accounts or particulars concerning any income on which tax is payable under this Act, or unlawfully refuses or neglects to pay tax, is guilty of an offence and liable on conviction to a fine of ₦50,000 for individuals and ₦500,000 for corporate bodies or imprisonment for not more than six months. 
4. A person who is a person appointed for the due administration of this Act or employed in connection with the assessment or collection of the tax demands from a person an amount over the authorized assessment of the tax; or withholds for his use or otherwise, a portion of the amount of tax collected or received by him; or defrauds a person, embezzles any money, or otherwise uses his position to deal wrongly with the relevant tax authority; or not being authorized under the PITA to do so, collects or attempts to collect the tax under this Act, is guilty of an offence and liable on conviction to a fine of ₦100,000 or imprisonment for three years or both such fine and imprisonment. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

By:      Farouk Obisanya

Principal at Rouk & Co.