Many Nigerian especially those in the real sectors have been
paying their taxes regularly but most cannot state how their employers arrive
at those strange figures. The essence of this post is to help you understand
the recent amendment in the personal income tax law of Nigeria as at 14 June 2011.
Key changes
· Introduction of a consolidated tax free
allowance of N200,000 or 1% of gross income, whichever is higher, plus 20% of
the gross income.
NB:
Gross emolument (or income) is defined to include benefits in kind, gratuities,
superannuation and any other incomes derived solely by reason of employment.
· Principal place of
residence redefined to include places where branch offices and operational site
of companies are situated.
. Benefit-In-Kind (B.I.K) may be defined as those benefits or
perquisites that accrue to a person by reason of the office and/or position
he/she occupies. Benefits in kind include such benefits as official car,
official accommodation, cooks, gardeners, security etc
. Operational sites are defined to include oil
terminals, oil platforms, flow stations, construction sites, etc with a minimum
of 50 workers.
. The due date for remitting PAYE is the 10th day of every month
following the month of deduction.
After
all deductions incomes are taxed as follow
|
Old Bands
|
Old Rates
|
New Bands
|
New Rates
|
|
First N30,000
|
5%
|
First N300,000
|
7%
|
|
Next N30,000
|
10%
|
Next N300,000
|
11%
|
|
Next N50,000
|
15%
|
Next N500,000
|
15%
|
|
Next N50,000
|
20%
|
Next N500,000
|
19%
|
|
Above N160,000
|
25%
|
Next N1,600,000
|
21%
|
|
|
|
Above N3,200,000
|
24%
|
· Increase in minimum tax rate from 0.5% to 1%
of gross income
· Benefit in kind now specifically included in
gross emolument and by implication taxable income
· Temporary staff now specifically liable to tax.
This will include casual workers, interns and other contract staff.
· Reimbursements and expense claims still
applicable as the relevant provision of the law was not deleted by the
amendments. Also it cannot be argued that reimbursements (by their nature) are
included in consolidated allowances. This means that employees will continue to
enjoy tax free cost of passage, medical and dental expenses etc
· Conditions for exemption from personal income
tax for any employment wholly or partly performed in Nigeria now modified to
require evidence that such individuals are liable to tax in another country
under the provisions of a double tax treaty. Also where the remuneration is
borne by a fixed base of the non-resident employer in Nigeria, the individual
will be deemed to be liable to tax in Nigeria. In addition, the 183-day
residency rule has been modified to include periods of temporary absence or
leave.
· 1% bonus for early filing of assessment by
individuals has been removed.
· Provision for the refund of excess withholding
tax (WHT).
· Interest on WHT default to be at the Central
Bank of Nigeria Monetary Policy Rate (MPR).
· Interest on default in payment of tax due to be
at bank base lending rate to be imposed on an annual basis from the date when
the tax becomes due until it is paid. This means simple interest will now be
charged as against the current practice of a flat rate (one-off) interest.
· Filing of annual returns now 31 January
(previously 31 March).
· Minimum of 5% retention of revenue collected by
tax authorities for administrative purposes. It is not clear whether this would
also cater for tax refunds.
· Tax officers now required to apply to the High
Court for a warrant of distrain before exercising their powers to distrain for
failure by taxpayers to pay final and conclusive tax liability under the law.
· Itinerant worker redefined to include any
individual irrespective of status who works in more than one state for at least
20 days in at least 3 months of every assessment year.
· Individual tax clearance
certificates (TCC) to be demanded for change of ownership of vehicles and
application for land title transfer or perfection.
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