Business
‘Why annual filing of returns is important’
Since the enactment of the new tax laws, both the Federal and state governments have left no stone unturned in amplifying the various provisions of the laws to the attention of corporate and individual tax payers. The Director, Personal Income Tax, Lagos Internal Revenue Service (LIRS), Ayodele Adebayo, speaks on the salient issues in this chat with Group Business Editor, SIMEON EBULU
Which categories of persons are tax exempt under the new tax Act, are exempt persons still required to file annual returns?
Exempt persons include individuals earning below the minimum taxable threshold and others specified by law pursuant to section 163 of Nigeria Tax Act. However, exemption from tax does not always mean exemption from filing, where filing is required for record purposes.
Are unemployed persons required to file returns, or obtain a Tax ID?
Unemployed individuals are generally not liable to pay tax, but obtaining a Tax ID may still be necessary for banking, employment, or regulatory purposes.
There’s the misconception that every bank transfer must carry a detailed narration. What is required of taxpayers?
Taxpayers should focus on proper documentation, clearly separate personal and business accounts, do their filling accurately with full disclosure. Good record-keeping, not excessive narration, is what ensures compliance.
Why is January such a critical month for employers in terms of Personal Income Tax compliance?
January is critical because it is the statutory period for employers to reconcile and formally report all emoluments paid to employees in the preceding year pursuant to Section 14(1) of the Nigeria Tax Administration Act, 2025. While PAYE is remitted monthly, January annual filing confirms the accuracy, completeness, and consistency of those remittances and ensures employees’ tax records are properly updated.
What specific returns are employers required to file with LIRS?
Employers are required to file the employees annual PAYE returns, which includes the Annual PAYE schedule (Form H1 or electronic equivalent), a detailed list of employees and their earnings, taxes deducted and remitted for the year under review, monthly returns of deduction of tax at source (PAYE & WHT) pursuant to Section 28 of the Nigeria Tax Administration Act, 2025 which states that every person who has an obligation to deduct and remit tax under this Act, or any other tax legislation, shall render monthly returns to the appropriate tax authority, as specified in the regulation issued for that purpose
Who qualifies as an employer of labour, does this obligation apply even when PAYE has been deducted and remitted?
An employer of labour includes companies, partnerships, NGOs, government agencies, and sole proprietorship that engage one, or more employees. Yes, the obligation still applies even where PAYE has been correctly deducted and remitted monthly. Monthly remittance does not replace the mandatory annual return, which is required by law.
What are the key data that must provided in the employer’s annual return, and does it cover both current and exited employees?
The return must include employer details, including name, address, Tax ID, designation, gross emoluments, inclusive of salary, allowances and benefits. Also required is tax deducted and remitted, as well as the period of employment. It must cover both current and exited employees who were in employment at any time during the year.
Beyond the regular PAYE remittances, are there other statutory returns employers are required to submit?
Depending on circumstances, employers may also be required to submit Withholding Tax (WHT) returns,Capital Gains Tax (CGT) returns, where applicable, monthly returns of deduction of tax at source (PAYE & WHT) pursuant to Section 28 of the Nigeria Tax Administration Act, 2025 which states that every person who has an obligation to deduct and remit tax under this Act, or any other tax legislation shall render monthly returns to the appropriate tax authority, as specified in the regulation issued for that purpose.
How can employers file these returns, and what platform has LIRS provided to make the process seamless?
Employers can file returns through the LIRS e-Tax platform, or any designated LIRS tax stations, with support from account officers. The LIRS has digitised filing to ensure ease, accuracy and reduced turnaround time.
What common mistakes has LIRS observed in past filings, and how can employers avoid them?
Common mistakes include omitting exited employees, incorrect Taxpayer IDs, mismatch between PAYE remittances and annual returns, late filing and incorrect numbers of months worked. Employers can avoid these by early preparation, proper reconciliation and validation before submission.
What’s the deadline for submission, are there penalties for late, or non-filing even where PAYE payments are up to date?
The statutory deadline is January 31 of each year pursuant to Section 14(1) of NTAA which states that ‘’an employer shall file a return with the relevant tax authority for all emoluments paid to its employees, not later than 31 January of each year in respect of all employees in its employment in the preceding year. Penalties apply for late, or non-filing pursuant to section 101 of NTAA. That section states that: ‘’A taxable person who fails, or refuses to file returns, or knowingly files incomplete, or inaccurate returns to the relevant tax authority in accordance with the provisions of this Act, shall be liable to pay an administrative penalty of N100,000 in the first month in which the failure occurs, and N50,000 for each subsequent month in which the failure continues. Even if PAYE payments were fully remitted, filing is a legal obligation, not optional.
Why is the annual filing of returns important to the LIRS, states and taxpayers?
Annual filing helps LIRS maintain accurate taxpayer records, supports government planning and budgeting, protects employees by ensuring correct tax history and promotes transparency and trust in the tax system.
What support and guidance are available to employers who may be experiencing challenges with their filings?
LIRS provides dedicated account officers, Help desks at Tax Stations, Online guides and advisories, stakeholder engagement sessions. Employers are also encouraged to reach out early.
The new tax law took effect from January 1, 2026. In simple terms, what is this law about?
The new tax law is designed to simplify Nigeria’s tax system, eliminate multiplicity of taxes, improve fairness, and broaden the tax base, while supporting economic growth.
Why was this tax reform considered necessary at this time?
It was necessary to address inefficiencies in the existing tax framework, improve revenue sustainability, and align Nigeria’s tax system with modern economic realities, including the digital economy.
Under the new law, how many taxes can a State Internal Revenue Service legitimately impose?
The law clearly defines and limits the number of taxes that states can impose, such as Personal Income Tax, PAYE, WHT, Direct Assessment, Stamp Duties, Capital Gain Tax on Individuals, thereby eliminating arbitrary charges and ensuring predictability and fairness for taxpayers.
The Personal Income Tax rates are progressive and slightly higher. Should higher-income earners be worried, will it have negative effect on entrepreneurship?
No, certainly not. The progressive structure ensures that higher-income earners contribute fairly, while lower-income earners are protected. It is not intended to discourage entrepreneurship, but to promote equity and shared responsibility.
What impact is the new law expected to have with regard to bringing more taxpayers into the tax net?
The law is expected to significantly expand the tax net, especially by capturing informal and digital economy participants, improve compliance through data integration and transparency.
There has been confusion around Tax Identification Numbers. Which should be used—LIRS Taxpayer ID or JTB TIN?
For Lagos taxpayers, the LIRS Taxpayer ID remains valid and sufficient. It is harmonised with the national system, and taxpayers should not panic or duplicate registrations.
What steps is Lagos State taking to domesticate the new tax law?
Lagos State is currently reviewing existing laws for alignment, engaging stakeholders, upgrading systems and capacity, rolling out public education and guidance.
What is LIRS’ key message to employers under NTAA 2025 regarding January annual filing?
Our key message is simple Taxpayers should file early and accurately. January annual filing is not just a statutory duty, it is a partnership between employers, employees and government to build a transparent, equitable, and sustainable tax system for the state.
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