This guide breaks down how PAYE compliance works in Nigeria, focusing on three major economic hubs; Lagos, the Federal Capital Territory, and Rivers State. Each one has its own peculiarities, its own systems, and its own deadlines. Understanding these differences could mean the difference between smooth operations and painful penalties.
At the heart of Nigeria’s PAYE system lies the Personal Income Tax Act (PITA). It sets the foundation for how personal income tax should be calculated, deducted, and remitted. While PITA establishes the framework, each state, through its Internal Revenue Service, is responsible for collecting and administering the tax.
In other words, the federal government provides the rules; the states handle the players. This is why compliance requirements can differ depending on where your employees work or reside.
Under the federal framework, the PAYE tax rates apply nationwide and follow a progressive structure. This means that the higher an employee’s income, the more tax they pay as a percentage of that income.
In addition to these rates, the Consolidated Relief Allowance (CRA) gives employees a tax break. It’s designed to ensure that lower-income earners aren’t overburdened and that everyone enjoys a minimum level of relief before taxation begins.
When it comes to taxation in Nigeria, Lagos State is often the trendsetter. The Lagos Internal Revenue Service (LIRS) has built one of the most digital and structured systems in the country. For many small and medium-sized businesses, understanding how Lagos handles PAYE is crucial because it’s where most corporate activity happens.
Tax Authority: Lagos Internal Revenue Service (LIRS)
Filing Portal: https://eportal.lirs.gov.ng
Monthly Deadline: 10th of the following month
Key Features:
Special Considerations:
Lagos operates the most digitized PAYE system in Nigeria. The LIRS portal is well integrated with taxpayer records, making it easier to track remittances. However, it also means there is little room for error.
If your company is headquartered elsewhere but employs staff who work physically or remotely within Lagos, those employees must still be registered with LIRS. The state tax authority considers the place of work, not just where the employer’s head office is located.
The Federal Capital Territory, managed by the FCT Internal Revenue Service (FCT-IRS), has become more assertive in tax collection over recent years. While the system here mirrors federal guidelines closely, the FCT-IRS has been investing in technology and staff training to improve compliance monitoring.
Tax Authority: FCT Internal Revenue Service (FCT-IRS)
Filing Portal: https://fct-irs.gov.ng
Monthly Deadline: 10th of the following month
Key Features:
Special Considerations:
Many government agencies, multinationals, and NGOs operate out of Abuja. As a result, the FCT-IRS often deals with high-profile employers. Expect meticulous scrutiny during audits, especially for organizations with complex payrolls or international staff.
One common issue businesses face is misallocation of remittances. Because the FCT-IRS system is still evolving, using the correct payment references and maintaining digital records is critical.
Rivers State, with its oil and gas dominance, contributes a major share to Nigeria’s tax revenue. The Rivers State Internal Revenue Service (RIRS) is particularly vigilant with companies in the extractive industries, but even small businesses in Port Harcourt and surrounding areas must take PAYE seriously.
Tax Authority: Rivers State Internal Revenue Service (RIRS)
Filing Portal: https://rirs.gov.ng
Monthly Deadline: 15th of the following month
Key Features:
Special Considerations:
Rivers State has intensified tax monitoring and compliance checks, especially among contractors who often operate across multiple states. The RIRS also coordinates with federal agencies like the FIRS to verify company filings.
Companies must ensure that every staff member’s location of service is properly recorded. An engineer working in Port Harcourt but paid from Lagos, for example, must have PAYE remitted to Rivers, not Lagos.
Let’s walk through a real example. Suppose an employee earns ₦500,000 per month, or ₦6,000,000 annually, and works in Lagos.
Step 1: Determine Gross Annual Income
₦6,000,000
Step 2: Apply Consolidated Relief Allowance
CRA = ₦200,000 plus 20% of gross income
CRA = ₦200,000 + ₦1,200,000 = ₦1,400,000
Taxable Income = ₦6,000,000 – ₦1,400,000 = ₦4,600,000
Step 3: Apply the Federal Tax Bands
First ₦300,000 at 7% = ₦21,000
Next ₦300,000 at 11% = ₦33,000
Next ₦500,000 at 15% = ₦75,000
Next ₦500,000 at 19% = ₦95,000
Next ₦1,600,000 at 21% = ₦336,000
Remaining ₦1,400,000 at 24% = ₦336,000
Annual PAYE = ₦896,000
Monthly PAYE = ₦74,667