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Excess tax refundable on application

Published by Tribune on Fri, 13 Feb 2015

As it is the case with several tax types, the Personal Income Tax (PIT), which is made up of direct assessment for self-employed enterprises and Pay-As-You-Earn (PAYE) for salary earners, has attracted various questions from taxpayers across the nation. In a question and answer session with the Director, Medium Tax Department, Federal Inland revenue Service (FIRS), Peter Ademola Olayemi, he explains PIT and PAYE.What is PAYE'PAYE is an acronym for 'pay as you earn.' It is a method of collecting personal income tax from employees' salaries and wages through deductions at source by an employer as provided by the relevant sections of the Personal Income Tax Act (PITA).What is the due date for remitting PAYE'The due date for remitting PAYE is the 10th day of every month following the month of deduction.Do PAYE charges on income vary from ministry to ministry for the same level of income/salary'PAYE does not differ because the rates used for computation are the same. The current rates applicable to the chargeable income are as follows:1stN300,000 at seven per centNextN300,000 at 11 per centNext N500,000 at 15 per centNext N500,000 at 19 per centNext N1,600,000 at 21 per centAbove N3,200,000 at 24 per centIs the submission of comprehensive list of staff with monthly PAYE deductions/remittance different from submission of annual returns'Yes, the two submissions, though made at different times, should be accompanied with a comprehensive list of staff that suffered the PAYE deductions. Comprehensive list of employees from whom PAYE deductions were made is continuously submitted on monthly basis each time PAYE is deducted and remitted to FIRS for residents of FCT, police, members of the armed forces, officers of the Nigerian Foreign Service and non-residents that derive income/profit in Nigeria and to the states boards of internal revenue, residents of the respective states. The annual returns (from H1) on the other hand is to be submitted by 31st day of January of every year by every employer to enable the tax authority ascertain whether the correct deductions and payments of tax have been made for the previous year (period of twelve months) for all its employees and for incomes from all sources earned during the year.What is benefit-in-kind'Benefit-In-Kind (BIK) may be defined as those benefits or perquisites that accrue to a person by reason of the office and/or position he/she occupies. Benefits in kind include such benefits as official car, official accommodation, cooks, gardeners, security etc. The amount treated as BIK in the hand of the officer that enjoys the benefit is added to his income in arriving at his/her gross/consolidated income that is assessed to tax.Where should PAYE deductions from the salaries of a staff working in Abuja but residing in Suleja or Mararaba be remitted to'By residency rule, an employee's PAYE is payable to the tax authority of the state of his/her residence. It is therefore the duty of the employer to deduct and remit it to the tax authority where the employee is resident. If the employee is resident in Suleja, the tax authority that is entitled to his PAYE is the Niger State Board of Internal Revenue. If he is, however, resident in Mararaba, the tax authority will be the Nasarawa State Board of Internal Revenue.What is the minimum tax rate for Personal Income Tax'The minimum tax rate is one per cent of gross income. It is applicable if the taxable income is below N300, 000.Is it possible to apply for a refund for excess Personal Income Tax deductions/payments'Yes. The law provides that excess tax paid by any employee shall be refunded on application by the employee to the relevant tax authority. He could however elect to have the excess tax payment be used to off-set future tax liability.When there is under-deduction of tax from the employee's income, who bears the burden of the under deduction'Section 82 of Personal Income Tax Act, Cap P8, LFN 2004, states that 'where an employer is required under a provision of this Act to make deductions from emoluments or amounts on account of emoluments paid by him to an employee shall account to the relevant tax authority in such manner as the relevant tax authority may prescribe for the deductions so made, and in the event of failure by the employer to make the deduction, or properly to account therefore, the amount thereof together with a penalty of 10 per cent per annum of the amount plus interest at the prevailing commercial rate shall be recoverable as a debt due by the employer to the relevant tax authority'Based on this provision of the law, when there is an underdeduction of tax from a staff salary, the employer whose duty it is to deduct correctly and remit to the relevant tax authority bears the burden.What is gross emolument/salary'Personal Income Tax Act (PITA, 2011) as amended defines gross emolument as the aggregate of wages, salaries, allowances (including benefits-in-kind), gratuities, pension, superannuation and any other income derived solely by reason of employment.What are non-taxable deductions under the PIT Act'The sixth schedule of Personal Income Tax (Amendment) Act, 2011 listed the following as tax exempt:a) National Housing Fund contributionsb) National Health Insurance Scheme contributionsc) Life Assurance Premiumd) National Pension Schemee) GratuitiesIs it within the law for a State Board of Internal Revenue to charge interest, penalty and threaten distrainment for a shortfall between the PAYE remitted by a company and the PAYE deducted as stated on the company's tax deduction cards'It is lawful for the relevant tax authority to carry out audit of your returns to ascertain compliance. It is also lawful for a penalty and interest to be imposed and to carry out enforcement action of distraint to recover any shortfall in the remittance of tax deducted. It should however be noted that a taxpayer should be given a fair hearing during a reconciliation meeting by both parties where all issues must be discussed. Where a taxpayer is still not pleased with the decision after the reconciliation meeting, he/she can approach a higher authority of the relevant tax authority after which he could appeal to the Tax Appeal Tribunal for adjudication under the relevant provision of the PITA, 2011 (as amended).What is the tax implication of giving new/used vehicles to staff for use in an organisation'This is treated as BIK five per cent of the value of the vehicle is calculated and added to the income of staff that enjoyed the benefit and taxed accordingly.What is the current relief claimable under Personal Income Tax Act'The Personal Income Tax Act (PITA) as amended provides for Consolidated Relief Allowance (CRA) of N200,000 or one per cent of gross income whichever is higher plus 20 per cent of gross income. The balance shall be taxable in accordance with the tax rates in schedule six of the Act.
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