Filing of Annual Income Tax Returns by Individuals

According to Section 41 of PITA, all taxable persons are required, without notice or demand, to file a return of their income in the prescribed form and containing specific information in relation to their income and taxes thereon with the tax authority of their State of residence.

The return should contain income earned from all sources in the year preceding the year of assessment computed in line with the provision of PITA.

This return is commonly referred to as “Form A” by many State Boards of Internal Revenue Services and expected to be filed not later than the 31st of March of each year.

However, in the case of Lagos State Internal Revenue Service (LSIRS), the return is expected to be done online using their e-tax platform.

This return is expected to be filed by all individuals including:

1. those who are self-employed who are to submit their tax returns by way of direct assessments and
2. those who are in paid employment under the Pay-As-You-Earn (PAYE) scheme.

The only category of individuals that are exempted from filing income tax returns are those whose only source of income in any year of assessment is employment in which they earn N30,000 (thirty thousand Naira) or less from that source. All other individuals are expected to file annual income tax returns in line with the provisions of Section 41 of PITA.

Although no penalty was specifically indicated for failure to comply with the provisions of Section 41 of PITA, the penalties specified in Section 94 of PITA would be applicable. This section contains the penalty for contravention or failure to comply with any of the provisions of PITA or any rule or regulation made thereunder for which no other penalty is specifically provided. For such offenses and contravention, a penalty of N5, 000 (five thousand Naira) is applicable upon conviction. In addition, where the offense is the failure to file a return (as required by Section 41 of PITA), a further penalty of N100 (one hundred Naira) for every day during which the failure continues shall be imposed including terms of imprisonment for six months.

The above penalty may seem immaterial, but for an employer with a high number of employees, the amount could be significant especially with the daily penalties. While these penalties are imposed on the taxpayers directly, it won’t be surprising if the Tax Authority seeks to gain access to those under the PAYE scheme through their respective employers. For many companies, the distraction that such may cause to their business is enough to raise concerns.