The deadline for filing annual PAYE returns is approaching, raising concerns for employers about ensuring full compliance under Nigeria’s updated tax framework.

In a media chat on Friday, Tokunbo Akande, special adviser to the executive chairman of the Lagos State Internal Revenue Service (LIRS), clarified filing obligations, addressed concerns over penalties and tax identification, and debunked common misconceptions about the new tax regime.

Why is January such a critical month for employers of labour in terms of Personal Income Tax compliance?

January is critical because employers of labour must file their annual PAYE returns immediately after the end of the previous year. This filing reports what transpired in the previous year: how much compensation was paid, tax deducted, and tax remitted.

Unlike individual taxpayers, who have until 31 March, employers must begin filing from 1 January, making January the statutory compliance window.

Who qualifies as an employer of labour, and does this obligation apply even when PAYE has been deducted and remitted monthly?

An employer of labour includes any person or organisation that pays compensation to natural persons for services rendered. This includes full-time employees, temporary staff, contractors, consultants, and vendors.

Even where PAYE has already been correctly deducted and remitted monthly, the January filing obligation still applies; it’s about reporting and reconciliation, not additional payment.

Employers are required to disclose who was paid during the year, how much was paid to each person, the amount of tax deducted, and what was ultimately remitted to the tax authority.

What key information must be included in the employer’s annual return, and does it cover both current and exited employees?

The annual return covers both current and exited employees, including anyone who worked for the employer for even just one month in the previous year.

Employers are required to report the names of all employees, contractors, and vendors paid during the year, alongside their Tax Identification Numbers (Tax IDs), the gross compensation paid, the tax deducted, and the net amounts ultimately paid out.

Evidence of tax remittance must also be provided. Exited employees are not excluded from this process because the filing is intended to capture historical transactions for the year under review, rather than reflect the employer’s current workforce.

How can employers file these returns, and what platforms has LIRS provided to make the process seamless?

All tax filings are now fully electronic, as manual filing was discontinued in 2022. Employers can submit their returns online through the LIRS e-tax platform at etax.lirs.net using a phone, laptop, or desktop.

Those who require assistance can also file at any LIRS office, where dedicated officers provide free support to taxpayers. In addition, LIRS operates a helpdesk line, 0700-CALL-LIRS (0700-2255-4477) and an escalation system to resolve technical issues that may arise.

There are also plans to introduce USSD-based filing to further expand access and ease compliance.

What is the deadline for submission, and are there penalties for late or non-filing even where PAYE payments are up to date?

Yes, penalties apply even where PAYE has been fully paid. Failure to file attracts an initial penalty of N100,000, with an additional N50,000 charged for every subsequent month of default until the filing is completed.

Beyond these financial sanctions, non-compliance also carries reputational risks, particularly for organisations that place a high value on corporate integrity and maintaining a strong regulatory standing.

What support and guidance is available to employers who may be experiencing challenges with their filings?

LIRS provides multiple support channels to assist taxpayers with compliance, including free in-person filing support at all its offices, telephone assistance through its call centre, and online guides and publications that explain filing requirements in detail.

There is also an internal escalation system to address unresolved issues. Taxpayers are strongly encouraged to seek clarification early rather than delay filing, as timely support can help prevent errors and penalties.

What are the new tax laws that just took effect all about?

The new tax laws represent a comprehensive overhaul of Nigeria’s tax framework, aimed at protecting low-income earners, supporting small businesses, and making compliance cheaper and easier for taxpayers.

They are also designed to promote fairness by more closely aligning tax obligations with individuals’ and businesses’ ability to pay.

The reforms rank among the most fundamental fiscal changes Nigeria has undertaken since independence.

Why was this tax reform considered necessary at this time?

Many previous laws were outdated, with penalties that didn’t reflect economic realities. At times, non-compliance was cheaper than compliance, inadvertently encouraging default.

The new laws reduce compliance costs, increase penalties for non-compliance, and modernise tax rules to reflect inflation and current economic activity.

Personal Income Tax rates are now more progressive. Should higher-income earners be worried, and will this discourage entrepreneurship?

No. Data analysis conducted by LIRS on more than 1.5 million anonymised taxpayer records shows that 54.5 percent of taxpayers will pay no tax at all, while 43.9 percent will pay less than they did previously, and only 1.6 percent will see an increase in their tax burden.

Even for higher-income earners, tax rates remain low by international standards. Overall, the reforms are expected to boost disposable income for the majority of workers, encourage consumption and business growth, and support long-term revenue sustainability.

There has been confusion around Tax Identification Numbers. Which should be used: the LIRS Taxpayer ID or the Joint Revenue Board (JTB) Tax ID?

Nigeria is transitioning to a single, unified Tax Identification Number under the Joint Tax Board (JTB Tax ID) system. During this transition period, existing LIRS PAYE IDs remain valid and continue to be recognised, as all current identifiers are being mapped to the JTB Tax ID.

For now, taxpayers can use either ID, but once the migration is completed later in the year, only the unified JTB Tax ID will be visible and in use across the system.

Under the new tax law, which categories of persons are exempt, and are exempt persons still required to file annual returns?

Exempt persons include individuals earning the national minimum wage or less, as well as those whose chargeable income after allowable deductions falls below the prescribed threshold.

Small and medium-sized enterprises are also exempt where their turnover does not exceed N100 million, and their total assets are N250 million or less.

However, even where no tax is payable, record-keeping and filing obligations may still apply, particularly to avoid the application of presumptive tax.

There is a growing belief that every bank transfer must carry a detailed narration to avoid tax issues. What should taxpayers really do?

Detailed narration of transactions is encouraged primarily for record-keeping purposes, not because every transfer is subject to tax. The tax authority is mainly concerned with income earned and profits above statutory thresholds.

Taxpayers are therefore encouraged to keep proper records, formalise their operations, and maintain a clear separation between personal and business finances.

Failure to keep accurate records can expose businesses to presumptive tax, while proper documentation helps protect compliant taxpayers.

What is LIRS’ key message to employers of labour under NTAA 2025 regarding the timely and accurate January annual filing?

There is nothing to fear about the new tax laws. Employers are encouraged to ignore misinformation, file their returns early, ensure accurate compliance, and seek clarification whenever needed.

Under the new framework, compliance is rewarded, non-compliance is penalised, and support is readily available to assist taxpayers throughout the process. (BusinessDay)