Understanding PAYE vs Personal Income Tax (PIT)

The Lagos State Internal Revenue Service (LIRS) has extended the deadline for filing Annual Returns to April 14. It is therefore essential for taxpayers to clearly understand the distinction between Pay-As-You-Earn (PAYE) and Personal Income Tax (PIT), as well as employer filing obligations.

Many employees assume that once tax is deducted from their salaries, their obligations are fully satisfied. However, this is not always the case.

Personal Income Tax (PIT) is the statutory tax charged on an individual’s total income, while PAYE is the system through which this tax is deducted and remitted by employers on behalf of employees.

A common issue arises where an employee files their returns independently on the State Internal Revenue Service (SIRS) portal, but the employer fails to file or remit PAYE. This creates discrepancies in the tax records, which may lead to:

Outstanding tax liabilities being recorded against the employee

Delays or challenges in obtaining a Tax Clearance Certificate (TCC)

Requests for supporting documents such as payslips or employment records

While employers bear the primary responsibility for deducting and remitting PAYE, employees are encouraged to take proactive steps to ensure that their tax records are accurate and properly reconciled.

Key Takeaway:
Filing your tax returns alone is not sufficient—confirm that your employer complies with PAYE obligations to avoid future tax issues.

Recommendation:
LIRS should consider including a field for employer/company name in individual tax filings to improve transparency and reconciliation.