DIRECTORS UNDER PAYE SCHEME: CRACKING THE PUZZLE

There has been a long running argument on the filing of Directors under the self assessment scheme. Directors are captured under the PAYE (Pay As You Earn) scheme as part of the organization in which they function. Therefore, when a company files its Employers’ Annual Personal Income Tax (Pay As You Earn – PAYE) Returns, the directors are included. However, Directors are considered as High Networth Individuals (HNI) and can still be assessed if they earn income from other sources other than the employment income.

In line with Section 41(3) and 36 of the Personal Income Tax Act (PITA), it is mandatory to declare income from all sources and file returns with the Relevant Tax Authority (RTA). Therefore, Directors are required to declare, apart from their employment income, other income from all sources and file returns.  

It is important for Directors to file returns of their income from all sources and claims for reliefs and allowances relating to the the preceeding year with the RTA within 90 days from the beginning of every year (i.e on or before the 31st of March). In a case where a Director has failed to file, the RTA will then raise a Best of Judgement (BOJ) Assessment by assuming his/her income based on appropriate economic and social variables applicable to the individual and ascertain the tax liability in line with Section 54(3) of PITA. It is noteworthy to mention that In a case where Withholding Tax (WHT) has been paid on dividend or interet income, this then becomes a WHT credit which can be used to offset the tax liability. This eliminates the idea of being double charged.

A Director may claim to have only one source of income if he/she is under a paid employment and does not earn income from other sources. Such a Director is still required to file as an individual even after he/she has been included in the PAYE returns of the employer. To avoid being double taxed, the evidence of tax remittance has to be provided.

What can Taxaide Do?

At Taxaide, we manage the tax affairs of HNIs and persons who require us to privately manage their PIT accounts and compliances with their Relevant Tax Authorities. This category includes entrepreneurs, C-suite executives, expatriates, et.al. We are accordingly able to, on individual levels, advise and assist these Taxpayer with their tax compliances and tax authority engagements.

As at today, our operations extend to all States in Nigeria, including the Federal Capital Territory.

We also assist Clients with dual/multiple tax residencies (that is, who in addition to Nigeria, maintain tax residence in other jurisdictions) to manage their Nigerian tax obligations, taking full benefit of the tax rebate options afforded them by law. At the heart of all our tax services, is to ensure that our Clients sustainably minimize their tax payouts while ensuring optimal compliance.

Please reach out to us or refer any of your HNIs or other interested persons to our PIT Management service. Thank you.

We have also provided a more convenient and do-it-yourself option through our application, PiTApp available on: www.pitapp.taxit.com.ng

For more information on Personal Income Tax Returns Filing and all tax-related issues, please do not hesitate to contact us at:

Tel: +234 700 TAXAIDE (0700 829 2433), +234 1 631 0971

WhatsApp: +234 810 701 7274

Email: pitdesk@taxaide.com.ng, business@taxaide.com.ng

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