Ahead of the January 31 deadline for filing yearly tax returns, the Director of Personal Income Tax of the Lagos State Internal Revenue Service (LIRS), Ayodele Adebayo, engages GEOFF IYATSE on the benefits of complying with the statutory responsibility to employers as well as sanctions

Could you give an overview of what filing of employers’ tax returns involves?
Filing of returns by employers is a statutory obligation; it is in line with section 81, subsection two of the Personal Income Tax Act (PITA) of 2004, which states that every employer of labour should file the annual returns on or before the 31st of January every year. It is also in line with the Nigerian Constitution.

So, it is guided by the law. As an employer of labour, you must file the annual returns with the Lagos State Internal Revenue Services (LIRS). This contains a lot of things. Information will be required which you need to provide honestly. The beauty of it is that it is now done digitally. The LIRS has done a lot of work to move from the usual manual process, which requires a lot of paperwork, to a digital process, allowing employers to submit digitally and seamlessly.
Failure to file returns as and when due comes has its implications, which are also guided by various laws.

Why is it important to file returns timely? Does an employer stand to gain anything?
It is very important, and I will tell you why it is very important. It has legal implications; it has financial implications. For instance, if any organisation, which includes a sole trader, fails to register and file the annual returns, there is a penalty. Such an organisation is liable to pay the penalty plus the interest calculated based on the number of months involved. Any employer who contravenes the provisions of section 81 shall be liable on conviction to a penalty of N500,000 in the case of a body corporate, and N50,000 in the case of an individual, according to section 81(3) of PITA.

It can also be charged to court for failure to carry out the obligation. As a corporate entity, when you are sued in court, you suffer both financial and reputational losses. People may be wary of doing business with the organisation. Corporate governance requires that organisations fulfil laid-down rules, including the filing of returns.

Filing returns helps your employees get tax clearance certificates, which is becoming very important. To get certain things done today, you are requested to present your tax clearance certificate. Some embassies regularly request it. Some parents are regularly required to provide their tax clearance certificates before their wards can be admitted to some institutions of learning.

Annual return filing enhances transparency and allows stakeholders to make informed decisions about their involvement with the company. Consistently filing annual returns contributes to building investor confidence in the company. It shows that the business is stable, well-managed, and committed to meeting its legal obligations, thereby attracting potential investors and improving access to capital.

What are the processes an employer is required to follow in filing returns?
It is very simple, but unfortunately, our people are laid back when it comes to such things. We find it difficult to follow processes. As I said, the process is now digitalised. The first thing to do is to log on to the LIRS website and interact with it. The platform opens for you the moment you input your corporate ID. If there is a need for a password, you will be given one.

The system automatically tells you what to do at every stage and you start populating the necessary information. At some stage, it will require you to upload vital documents. The system is so seamless; it is so interactive that you cannot miss anything. You are required to provide information on employees, their names, telephone numbers, email addresses, total emoluments, the amount of tax deducted and similar pieces of information. Every organisation gas the information required because it is for the previous year.

In preparing employer’s annual tax returns, employers must complete and submit Form H1 on the e-Tax platform, with details such as names of all employees during the tax year, gross income earned by each employee, tax deductions, that is pay-as-you-earn (PAYE), made for each employee, other allowances, benefits or income received by employees. A comprehensive schedule containing the taxpayer ID of employees is very important. It also requires employee remuneration breakdown, including salaries, allowances, bonuses and other benefits.

Employers must also reconcile the taxes deducted and remitted under the PAYE scheme with LIRS records to ensure there are no discrepancies.
Tax returns are the main document you file annually to report your total income earned from all sources during the tax year and calculate your final tax liability to the government which contains the employer’s annual declaration of total emolument, annual employer’s returns form (Form H1), a mandatory form that summarizes the total number of employees, emoluments and tax deductions, schedule of PAYE tax deductions and evidence of monthly PAYE remittances.

Could a company claim any incentives such as tax credits during filing?
Yes, companies operating in Lagos may claim certain incentives or tax credits during the filing process with the LIRS provided they meet specific criteria, which include accurate and timely filing of tax returns, proper documentation and evidence of all eligible expenses or payments and compliance with LIRS tax regulations.

The incentives typically align with Nigeria’s tax laws and regulations as well as applicable state policies. There are consolidated relief allowances, which provide a relief allowance for N200,000 or one per cent of the consolidated salary and gross emolument, whichever is higher plus 20 per cent of the consolidated salary. You can also get withholding tax (WHT) credits. This is for companies that have had taxes withheld at source during transactions. They can claim these as credits against their tax liability during the filing process. Documentation of WHT deductions, such as credit notes or remittance receipts, is essential to substantiate claims.

What should companies do to overcome filing challenges?
Early preparation is important. Start preparing for tax filing well before the deadline to address any issues that may arise. Also, engage tax consultants or accountants to simplify the process and reduce the risk of errors. Familiarise yourself with the LIRS e-Tax platform to streamline the filing process. Most people do not seek clarification. Reach out to LIRS directly or participate in their taxpayer engagement programmes to clarify any ambiguities.