Filing annual returns improves investor confidence, access to capital, LIRS director

The Lagos State Internal Revenue Service (LIRS) is on course to ensure every taxable person files their annual tax returns under the Personal Income Tax Act (PITA) 2011 (as amended) and other relevant tax laws.

To facilitate this process, the LIRS provides an online platform called e-Tax, which is accessible at etax.lirs.net.

In this interview with BusinessDay’s Wasiu Alli, Ayodele Adebayo, director, Personal Income Tax Unit, highlighted the importance of annual tax returns, especially how it could help boost investor confidence in a company and improve access to capital.

Why is it important for individuals to file annual tax returns?

Annual returns are very key. And the collection of revenues is also the bedrock of any state or government, be it federal or state. It’s also very key because it is a statutory obligation in line with section 24, subsection 1 of the Nigerian constitution that mandated every taxable Nigerian to declare their taxable income.

Annual returns play a crucial role in helping build trust and credibility with stakeholders, including investors, lenders, and business partners. This is achieved by giving them access to up-to-date financial information. It 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.

And then every person that is earning one form of income or the rest, it’s better to file their returns to any state where they are resident. Besides the constitution, filing of returns allows the government to be able to have necessary data and information about the individuals. It also helps, you know, in so many areas, such as ensuring compliance.

Who is legally required to file annual tax returns?

Every employee earning income from salaries, wages, allowances, or benefits within Lagos State must file an annual tax return using the Form A (Employer-Filed Returns). Also, employers are required to file PAYE tax returns on behalf of their employees by January 31st each year.

Individuals engaged in businesses, professions, trade, or vocations must file their annual tax returns directly. This includes entrepreneurs, freelancers, consultants, and artisans. Filing is done using Form B for direct assessment of taxpayers.

High Net-Worth Individuals (HNIs) with significant income from investments, dividends, rental properties, capital gains, or multiple income sources must file tax returns to declare all earnings. Business owners & sole proprietors—unregistered or registered business names—must declare their business income annually. Business profits are subject to Personal Income Tax (PIT).

Each partner in a partnership is individually required to file their annual tax return, separate from the business entity. Also, directors receiving sitting allowances, bonuses, or any other forms of income outside their salaries must report such earnings.
Individuals with multiple sources of income, such as earnings from employment, business, investments, or rental properties, must consolidate all income and file their returns accordingly. Similarly, non-residents with taxable income in Lagos earning rental income, consultancy fees, or business income within Lagos are required to file tax returns in the state.
While pension earnings are tax-exempt, retirees with other taxable income must file tax returns accordingly.

How does this obligation apply to employees whose taxes are going to be deducted by January?

That’s the mistake people make. There is an inheritance for corporate organisations. Because you work somewhere, you are an employee of a corporate entity. The company is mandated by law to file the inheritance of the employees as an employer. And they can only do that between January 1st and the 31st of January. That’s corporate.

But for an individual, an individual must make sure that, despite the fact that the employer has filed their corporate inheritance, they themselves must also file. Because it is only when you are able to file appropriately that you’ll be able to have access to what is called your tax clearance certificate.

After providing the necessary information, you know, as requested, you know, in what is called Form A. Part of what LIRS has done is to automate our filing system to what is called e-filing, e-tax, which is e-filing. All you need to do is just go into our website, log in to e-tax.lrs.gov, and before you know it, you’re already interacting with the system, and then you can put in all the information that you see there.

What is the official deadline for filing annual tax returns?

Individual taxpayers are required by law to file their annual tax returns within 90 days from the end of the fiscal year, which concludes on December 31. This means the deadline for filing individual annual returns is March 31 of the following year in line with 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.”

Are there provisions for deadline extensions, and what is the process for requesting them?

LIRS generally requires individuals and businesses to file their annual tax returns within the stipulated deadlines. However, in exceptional cases, deadline extensions may be granted under certain conditions.

Yes, LIRS allows for extensions in limited circumstances, primarily when a taxpayer formally requests an extension before the filing deadline and provides a valid reason such as technical issues with the LIRS e-Tax portal, incomplete financial records or pending audits, serious health issues preventing the taxpayer from filing on time, natural disasters or unforeseen emergencies affecting the business or individual, and delays caused by third-party service providers (e.g., accountants, consultants). But an extension applies only to the filing deadline. It does not postpone the payment of tax liabilities.

What happens to citizens or corporate organisations who perhaps file late, or who don’t even file at all?

Well, I’m going to be talking about the law. Because Section 36 talks about individuals filing their returns and declaring every source of income. Section 3 talks about chargeable income. These are laws. Section 41 itself spoke about, you know, if you don’t file within a specific time, then there are two ways to go about it.

Number one, an individual will suffer a 50,000 penalty, which is also being reviewed, as the case may be. And upon those penalties, on the amount that’s due, you also pay interest on it.

That’s why when it comes to the law, before we take anybody to court, we look at the processes; we look at documents submitted. You must submit to us your payslip of your earnings. You must also submit, as an individual, for instance, now you earn other sources of income, dividends, and rent; you know, the withholding tax element of it that you have paid; you also upload.

This is also expected to be that we ask some individuals to give us what is called a statement of affairs, where you tell us this is what you earn, these are some of your expenses, and this is your earnings for the year. So, all these documents are expected to be uploaded, and of course, we will file them and write on them.

What mechanisms are in place to detect under-reporting of incomes?

Let me tell you this. We collaborate with a lot of organisations now. And like I said, it’s going to get better. We are working with various government agencies, both at the local level and the federal level. When I say local level, I mean various MDAs within the states. We share data.

We’ve captured a lot of people through what we called motor vehicle registration. We work with the Ministry of Lands, and they give us information. As you are processing it, data is shared with us. You’re physically planning a program as you are processing it.

And that’s why I kept telling people that it’s just a matter of time. Now, we’re also going to get involved in data sharing with a lot of federal agencies through joint tax boards, of which some of them are members. So for you to run away, you know, it’s going to be very difficult. It’s just a matter of time before the law comes and catches up with some of us.

What payment platforms are available for seamless tax remittances?

We have so many. Number one, payment can be made through the comfort of your laptop as you are. There are POS and others. We have so many banks that are listed on the platform. All the banks approved by the federal government, by the CBN, are listed and approved to be paid in taxes.

What advice would you give to taxpayers for them to stop evading taxes and ensure compliance?

Do it in a good time. So that you don’t suffer late filing, penalties, interest elements, and other fixed charges that come with it. But the most important thing is if you don’t have the experience, the knowledge, and the filing of returns, you can always get a consultant, a good consultant that will also guide you. That’s just one. In addition to that, we also have people. We have a lot of provisions. We have a team that has been assigned to provide necessary assistance to taxpayers, guiding them step by step on filing of returns. And this team that we are talking about, they’re there 24-7 until the end of the filing of our returns. They’re there. So anyone can contact them, you know, at least up to 12 midnight.