By taiwo oyedele the personal income tax amendment act 2011 was officially gazetted on tuesday 31 january 2012 with an effective date of 14 june 2011. Income taxes are a source of revenue for governments. Pdf assessing the productivity of personal income tax system in. Revenue service firs and the central bank of nigeria cbn statistical bulletins. It is established under section 85 of the personal income tax act, amendment 2011. Pdf the study examined the effectiveness of personal income tax. P8 lfn 2004 and related matters connected therewith. Personal income tax in nigeria employees simply pay their income tax through the pay as you earn paye system, whereby employers deduct the due tax at source from the salaries and transfer it directly to the firs on a monthly basis, while independent workers and beneficiaries of additional income are required to file their own tax returns. Effect of tax avoidance and tax evasion in personal income tax. Administration of current taxes in nigeria vanguard news.
The personal income tax in nigeria is regulated by income tax management. The amount charged is 30% o the profit earned in the year preceding assessment. A delivering the lead judgement confirmed the position of the law on residency as follows. Any person or individual, corporate sole, organizations who consumes or buys any taxable product or service will have to pay a tax levy known as value added tax vat in nigeria. Nigerian law proviso sections 68 to 72 of the personal income tax. Pdf effect of tax avoidance and tax evasion on personal. Pdf personal income tax administration in the rural. Personal income tax pit and economic growth in nigeria. The tax system in nigeria is made up of the tax policy, the tax laws and the tax administration. S8, lfn 2004 charges duties on specified instruments listed in the acts.
The personal income tax pit is the most common tax type in the country. Pdf overview of nigerian income tax administration unit 1 meaning, types and functions of taxation in nigeria unit 2 tax administration instruments in. In the context of personal income tax, a person means an individual, a sole proprietorship nonjuristic person, communities and families and on executors and trustees of an undivided estate. Personal income tax the legal basis for this tax is found in the provisions of the personal income tax decree now act. Pdf the impact of personal income tax on state governments. Each state has its state internal revenue service that handles tax administration, while federal inland revenue service administers pita in the federal capital territory.
Impact of personal income tax on the growth of nigeria. A withholding tax is the tax required by law to be withheld by a party from each payment made to another contracting party from the income or services rendered. Companies resident in nigeria are liable for cit on their worldwide income and nonresident companies are liable only to cit on their nigeriansource income. Self employed individuals are expected to file annual returns annually and pay the taxes due. Pdf nigeria personal income tax amendment act 2011. Taxation is a crucial part of the everyday life of every person. Tax administration self assessment regulations 2011.
The administration of tax is vested in various tax authorities depending on the type of tax under consideration. V1, lfn 2004 imposes tax on the supply of goods and services made by incorporated companies and other business organisations. In the longterm, the nigeria personal income tax rate is projected to trend around 24. Companies resident in nigeria are assessable to tax on their worldwide income, whilst nonresident companies are subject to tax on profits accrued in or derived from nigeria, to the extent that the profits are not attributable to operations outside nigeria. Personal income tax act is a topic everyone should know, whether you are an employee or an employer. The new act would provide more disposable income to the lower income earners following the amendment of the income tax table and adjustments in the applicable income tax incremental bands, which brings it in line with current income levels. Personal income tax administration in nigeria economics essay.
Basically, pit is deducted as a result of trade, business, profession, vocation for a period of time and applies to personal emoluments such as wages or salaries, gratuity, superannuation or pension schemes as well as any other income derived by reason of employment. The personal income tax pit act, provides the conditions for deeming income taxable in nigeria. The origin of the pit can be traced to the personal income tax act no 30 of 1996. The study examines the effect of tax avoidance and tax evasion on personal income tax administration in nigeria. Personal income tax in nigeria is a tax levied on all incomes of an individual employed by a business or organization. The current law that governs the administering of personal income tax pit is the personal income tax act cap.
The administration of tax in nigeria is vested in the various tax authorities depending on the type of tax under consideration. Effect of tax avoidance and tax evasion on personal income. Withholding tax in nigeria administration and rates. Jul 23, 2018 the rate of tax payable is not a fixed sum, depending on the gross income of the taxable employee, and the tax relief granted to him under personal income tax act pita. Explanatory notes on withholding tax administration in nigeria. Tax evasion and tax avoidance, a problem which seems to have defied solution, had been deviled the tax system right from colonial times. The legal framework and system of taxation in nigeria. An income tax is a tax that governments impose on income generated by businesses and individuals within their jurisdiction. The rate of personal income tax payable is dependent on the amount of taxable income which the. This is approved for students in accountancy, business, computer science, economics, engineering, arts. By law, taxpayers must file an income tax return annually to determine their tax obligations. Personal income tax rate in nigeria is expected to reach 24. The board exercises power and duties confirmed on in by income tax management act itma and other powers agreed upon by the government of each state.
Introduction the president of the federal republic of nigeria in line with national tax policy signed into law the bill for an act to amend the provisions of the personal income tax act, cap. It provides, among others, that the gain or profit from an employment shall be deemed to be derived from nigeria if the duties of the employment are wholly or partly performed in nigeria or the employer is in nigeria, unless the duties of the employment are wholly performed, and the remuneration. Personal income tax administration in the rural communities a study of selected local government areas in ogun state, nigeria. According to the presidential committee on national tax policy 2008, the central objective of the nigerian tax system is to contribute to the. Individuals are subject to tax under the personal income tax act as amended. With the cashless policy fully operational in nigeria and the consequent integration of more tax payers in the financial system, there is palpable opportunity for tax authorities to track unidentified income through integrating their systems with financial institutions. Section 73 of personal income tax act and section of value added tax act. A study into the challenges of personal income taxation in ghana. Employees simply pay their income tax through the pay as you earn paye system, whereby employers deduct the due tax at source from the salaries and transfer it directly to the firs on a monthly basis, while independent workers and beneficiaries of additional income are required to file their own tax returns.
Capital gains tax is calculated and submitted with companies income tax to firs through designated bank. But the administration is vested in joint tax board. Challenges and prospects, a case study of lagos state board of internal revenue service, largest undergraduate projects repository, research works and materials. Many employers are yet to commence implementation while some. Impact of tax administration on government revenue in a. Get free research paper on a study into the challenges of personal income taxation in ghana project topics and materials in nigeria. It is a method of collecting personal income tax from employees salaries and wages through deduction at source. Nigeria personal income tax rate 20112020 data 20212022. Tax system the nigeria tax system is made up of tax law, tax policy and tax administration. Taiwo oyedele is a partner in the tax and corporate advisory services unit of pwc nigeria and a regular paper presenter on professional tax matters.
In nigeria for example, there were various tax system operating in northern. All of these are expected to work together in order to achieve the economic goal of the nation. Every taxpayer in nigeria is liable to pay tax on the aggregate amount of his income whether derived from within or outside nigeria, the salaries, wages, fees, allowances, and. Such authorities are the joint tax board, which is the apex unifying body for all tax authorities in nigeria. Tax and taxation in nigeria europeanamerican journals. The impact of personal income tax on state governments revenue profile in nigeria article pdf available in ssrn electronic journal november 2015 with 7,811 reads how we measure reads. The problems of nigeria personal income tax administration a case study of ministry of education abstract this project work is carried out on problem of personal income tax generation and administration taxation can be simply defined as a compulsory contribution by individuals and organizations to a statutory authority. Companies are mandated by law to pay company income tax cit in nigeria based on the profit. Abiola and asiweh12 stated that the three component of tax system are expected to work together in order to achieved the.