As we prepare to conclude this phenomenal year and celebrate the Christmas & New Year holidays, we will like to quickly bring to your attention the personal income tax filing obligations that every employer or business owner is required to prepare for in the coming year...
Preparations for 2021 should include plans to render income tax returns due in the first month/quarter of the next year. We explain below the income tax obligations that individuals/businesses should be mindful of:
I Employer’s Annual Return
Every employer is required by law to file an annual return of all salaries & allowances (including benefits) paid to its employees in 2020 and the taxes deducted therefrom on or before 31st January 2021. Essentially, the annual returns are to contain the annual income and taxes for Jan to Dec 2020.
The returns are to be submitted by the employer to the relevant tax authority(ies), that is, the Internal Revenue Service (SIRS) for each State its employees are resident in. An employer with employees resident in more than one state will need to file separate returns in each State.
For instance, if ABC Ltd has employees who are resident in Lagos, Ogun, and Ondo states, ABC Ltd, as the employer, will need to file returns in each state with the returns containing the details of the employees resident in that State.
Documents to be submitted include:
- Employers Annual Declaration and Certificate (Form H1) relating to incomes and employment tax (Pay As You Earn “PAYE”) paid for 2020.
- Schedule of PAYE remittances made for 2020 and the receipts evidencing same.
- Payments of Business Premises and Development Levy (if applicable in the state).
- Projection of the 2021 annual payroll.
- Schedule of Capital Gains Tax deducted and receipt of payment (if applicable).
In some states, the submissions can be made online, e.g. Lagos IRS.
The penalty for failure to file this tax return is N500,000 if the employer is a body corporate and N50,000 in the case of an individual.
II Direct Assessment
Direct Assessment is an assessment raised directly on self-employed persons (eg. Professionals, Contractors, Traders, Landlords etc). In this regard, a taxable person is required to file a self-assessment return of all incomes and taxes in the prescribed form to the State IRS. The total income and taxes for 2020 (Jan to Dec 2020) is expected to be filed not later than the 31st March 2021 to the SIRS in the State where the individual resides.
Documents to be submitted include
- The Direct assessment form (“Form A”)
- Evidence of tax remittances made for 2020 and the receipts evidencing the same.
This return can also be rendered online in some states through the platform created by the respective SIRS.
You can reach out to us for further clarification and/or assistance.