Ayodele Adebayo, Director, Personal Income Tax (PIT), Lagos State Internal Revenue Service (LIRS) speaks in this interview with Iheanyi Nwachukwu. Excerpt
What is Tax Annual Returns?
Annual Tax Return is a statutory obligation made by an individual or corporate organization to a Federal, State, or Local Taxing Agency to report all taxable income received during a specific period.
This is in line with Section 24(F) of the constitution of the Federal Republic of Nigeria which provides that “every taxable citizen shall declare his income honestly to appropriate and lawful agencies and pay his tax promptly” and also as provided in section 41(1) of PITA.
Section 41(1) of the Personal Income Tax Act, LFN Cap. P8 of 2004 as amended which states that; “a taxable person shall, without notice or demand therefore, file a return of income in the prescribed form and containing the prescribed information with the tax authority of the State in which the taxable person is deemed to be resident”.
However, E-tax which is the e-filing of Tax Returns is the process of electronically filing income tax return through the LIRS portal to report all taxable income received during a specific period to relevant taxing authority.
What is the difference between employer’s Annual filing and Individual Annual filing?
The difference between employer’s Annual filing and Individual Annual filing are: Employers are agent of Government who are saddled with the responsibilities to render returns of all emoluments paid to each of their employees in any preceding year to the Relevant Tax Authorities not later than 31st January of every year (30 days) as provided in Section 81(2) of the Personal Income Tax Act LFN Cap. P8 of 2004 as amended
However, individuals are statutorily obligated to file their annual returns and declare their Global Income from all source to relevant tax authority on or before 31st of March of every year (within 90 days from the commencement of every year of assessment) in line with Section 41(1) of the Personal Income Tax Act, LFN Cap. P8 of 2004 as amended.
What is the deadline for filing PAYE annual tax returns with the LIRS?
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.
What are penalties for Non-Compliance / Late Filing?
Any employer who contravenes the provisions of section 81 shall be liable on conviction to a penalty of N500,000 in the case of a body corporate, and N50,000 in the case of an individual (section 81(3) of PITA).
While in the case of failure by a person to comply with the provisions of Section 41 of this Act, the relevant tax authority may, in lieu of the institution of proceedings against the person under the provisions of subsection (2) of this section, impose a penalty on him of an amount equal to the income tax chargeable on him for the preceding year of assessment:
Why is this filing important?
Annual returns play a crucial role in the corporate governance and regulatory compliance of companies in Nigeria. These returns are a formal record of a company’s financial activities and operations over the past year, which are submitted to relevant government authorities.
It helps build trust and credibility with stakeholders, including investors, lenders, and business partners. By providing them with access to updated financial information.
Annual return filing enhances transparency and allows stakeholders to make informed decisions about their involvement with the company.
Consistently filing annual returns contributes to building investor confidence in the company. It shows that the business is stable, well-managed, and committed to meeting its legal obligations, thereby attracting potential investors and improving access to capital.
However, the biggest benefits that come with e-filing are stated below: its speed and security. It’s safer than mailing return; proof of receipt – confirmation that your return was received and accepted; convenience of filing taxes online – available online 24 hours a day, 7 days a week; electronic records of tax forms. It is faster processing, ease of use -user friendly, with step-by-step instructions, and there is accuracy of filing taxes online. Others are: More money for tax refund -e-filed refund returns are processed much faster than paper filed returns. (i). Electronic Banking – convenience of direct deposit for refunds and direct debit for tax payments Option to File Now, Pay Later – Decide what day we debit your bank account for your tax payment; and Less Hassle, No Stamps – no mailing of paper returns or W-2 statements. It is also secured – safer than mailing your tax return.
LIRS embraced the digital platforms for tax filing? what was online filing before the advent of the etax?
Before the advent of etax, an Individual Annual Tax Return is an official form (Form A) that a person submits to a Federal, State, or Local Taxing Agency to report all taxable income received during a specific period. This is in line with Section 24(F) of the constitution of the Federal Republic of Nigeria which provides that “every taxable citizen shall declare his income honestly to appropriate and lawful agencies and pay his tax promptly” and also as provided in section 41(1) of PITA.
What are some common mistakes that businesses make when filing their tax returns, and how can they avoid them?
Common mistakes made when filing tax returns are: Tax ID not validated with Tax Payer BVN, Employees Tax ID not applicable or available, Do not add comma in any of the columns, Do not add special character to the csv file, Do not change the file format from csv, and where any column is not applicable to your organisation, add 0.00
Following the submission of the company’s annual tax returns by employers, are there any additional statutory obligations for the employees within these companies and any deadlines?
Employees of labour are Statutorily obligated to file their annual tax returns via LIRS portal (https://etax.lirs.net or www.lirs.gov.ng), declare and upload returns of all income from ALL SOURCES for relevant Income Year in accordance with relevant Sections of Personal Income Tax Act as amended within the statutory period of ninety (90) days, from the commencement of every year of assessment (that is 1st January – 31st March, 2024) failing which a Best of Judgement (BOJ) assessment shall be raised on them in line with Section 54(3) of the above referenced Act or impose a penalty on him of an amount equal to the income tax chargeable on him for the preceding year of assessment in line with Section 94(4) of the above referenced Act.
Applicable Sections of PITA for employees of labour annual returns filing include; Section 24(F) of the constitution of the Federal Republic of Nigeria which provide that “every taxable citizen shall declare his income honestly to appropriate and lawful agencies and pay his tax promptly”. Section 36 of the Personal Income Tax Act, LFN Cap. P8 of 2004 as amended. Section 41(1) of the Personal Income Tax Act, LFN Cap. P8 of 2004 as amended which states that; “a taxable person shall, without notice or demand therefore, file a return of income in the prescribed form and containing the prescribed information with the tax authority of the State in which the taxable person is deemed to be resident’’.
