Special Adviser to the Executive Chairman of the Lagos State Internal Revenue Service (LIRS), Tokunbo Akande, in an interview with journalists, including ADEYEMI ADEPETUN, emphasised what the January 31 deadline for tax filing means for businesses and what the LIRS is doing to simplify the process.

Could you explain the significance of January for employers in terms of personal income tax compliance?
January is critical because employers of labour must file their yearly PAYE returns immediately after the end of the previous year. The filing reports what transpired in the previous year: how much compensation was paid, tax deducted and tax remitted.

Unlike individual taxpayers, who have until March 31, employers must begin filing from January 1, making January the statutory compliance window.

Does the obligation apply even when PAYE has been deducted and remitted monthly?
An employer of labour includes any person or organisation that pays compensation to natural persons for services rendered. This includes full-time employees, temporary staff, contractors, consultants and vendors.

Even where PAYE has already been correctly deducted and remitted monthly, the January filing obligation still applies; it is about reporting and reconciliation, not additional payment.

Employers are required to disclose who was paid during the year, how much was paid to each person, the amount of tax deducted and what was ultimately remitted to the tax authority.

For emphasis, what key information must be included in the employer’s yearly return, and does it cover both current and exited employees?
The yearly return covers both current and exited employees, including anyone who worked for the employer for even just one month in the previous year.

Employers are required to report the names of all employees, contractors and vendors paid during the year, alongside their Tax Identification Numbers (Tax IDs), the gross compensation paid, the tax deducted and the net amounts ultimately paid out.

Evidence of tax remittance must also be provided. Exited employees are not excluded from this process because the filing is intended to capture historical transactions for the year under review, rather than reflecting the employer’s current workforce.

One of the most cited challenges of filing is the slow process. How seamless is the process?
All tax filings are now fully electronic, as manual filing was discontinued in 2022. Employers can submit their returns online through the LIRS e-tax platform at etax.lirs.net using a phone, laptop or desktop. Those who require assistance can also file at any LIRS office, where dedicated officers provide free support to taxpayers.

In addition, LIRS operates a helpdesk line, 0700-CALL-LIRS (0700-2255-4477) and an escalation system to resolve technical issues that may arise.

There are also plans to introduce USSD-based filing to further expand access and ease compliance.

Are there penalties for late or non-filing even where PAYE payments are up to date?
Yes, penalties apply even where PAYE has been fully paid. Failure to file attracts an initial penalty of N100,000, with an additional N50,000 charged for every subsequent month of default until the filing is completed.

Beyond the financial sanctions, non-compliance also carries reputational risks, particularly for organisations that place a high value on corporate integrity and maintaining a strong regulatory standing.

What support and guidance are available to employers who may be experiencing challenges with their filings?
LIRS provides multiple support channels to assist taxpayers with compliance, including free in-person filing support at all its offices, telephone assistance through its call centre, and online guides and publications that explain filing requirements in detail.

There is also an internal escalation system to address unresolved issues. Taxpayers are strongly encouraged to seek clarification early rather than delay filing, as timely support can help prevent errors and penalties.

Can you take us through the new tax law, which took effect earlier this month?
The new tax laws represent a comprehensive overhaul of Nigeria’s tax framework, aimed at protecting low-income earners, supporting small businesses, and making compliance cheaper and easier for taxpayers. They are also designed to promote fairness by more closely aligning tax obligations with individuals’ and businesses’ ability to pay.

The reforms rank among the most fundamental fiscal changes Nigeria has undertaken since independence.

Looking at what the country is going through, should we be talking about tax reform at this time?
Many previous laws were outdated, with penalties that didn’t reflect economic realities. At times, non-compliance was cheaper than compliance, inadvertently encouraging default. The new laws reduce compliance costs, increase penalties for non-compliance, and modernise tax rules to reflect inflation and current economic activity.

Based on the new tax regime, personal income tax is now more progressive. Should higher-income earners be worried?
No, they should not. Data analysis conducted by LIRS on more than 1.5 million anonymised taxpayer records shows that 54.5 per cent of taxpayers will pay no tax at all, while 43.9 per cent will pay less than they did previously. Only 1.6 per cent will see an increase in their tax burden.

Even for higher-income earners, tax rates remain low by international standards. Overall, the reforms are expected to boost disposable income for the majority of workers, encourage consumption and business growth and support long-term revenue sustainability.

There has been confusion around Tax Identification Numbers. Which should be used: the LIRS Taxpayer ID or the Joint Revenue Board (JTB) Tax ID?
Nigeria is transitioning to a single, unified Tax Identification Number under the Joint Tax Board (JTB Tax ID) system. During this transition period, existing LIRS PAYE IDs remain valid and continue to be recognised, as all current identifiers are being mapped to the JTB Tax ID.

For now, taxpayers can use either ID, but once the migration is completed later in the year, only the unified JTB Tax ID will be visible and in use across the system.

Under the new tax law, which categories of persons are exempt, and are exempt persons still required to file yearly returns?
Exempt persons include individuals earning the national minimum wage or less, as well as those whose chargeable income after allowable deductions falls below the prescribed threshold.

Small and medium-sized enterprises are also exempt where their turnover does not exceed N100 million, and their total assets are N250 million or less.

However, even where no tax is payable, record-keeping and filing obligations may still apply, particularly to avoid the application of presumptive tax.

There is a growing belief that every bank transfer must carry a detailed narration to avoid tax issues. What should taxpayers really do?
Detailed narration of transactions is encouraged primarily for record-keeping purposes, not because every transfer is subject to tax. The tax authority is mainly concerned with income earned and profits above statutory thresholds.

Taxpayers are therefore encouraged to keep proper records, formalise their operations and maintain a clear separation between personal and business finances.

Failure to keep accurate records can expose businesses to presumptive tax, while proper documentation helps protect compliant taxpayers.