The Lagos State Internal Revenue Service (LIRS) issued a number of Public Notices in 2017 which sought to address specific areas of ambiguity and loopholes in the provisions of the Personal Income Tax Act, as amended (PITA). In those publications, LIRS imposed additional reporting/ filing obligations on taxpayers within the Lagos State jurisdiction.
To serve as a reminder, and to assist you prepare and file comprehensive Personal Income Tax related returns to LIRS this year (namely, employer returns- on or before 31 January; taxpayer returns- on or before 31 March), we have compiled below, summaries of these new reporting/ filing obligations imposed by LIRS in its various Public Notices.
LIRS Pubic Notice on “Treatment of Savings Element on Insurance Premium”:
Every employer/ taxpayer is required to:
- Submit Annual Form A (Claims for Allowances and Relief) for each relevant tax year detailing the life insurance and qualifying deferred annuity contributions; and
- Submit a certificate obtained from the relevant Life Assurance company which shows separately the premium relating to the death policy and that relating to any savings scheme.
LIRS Pubic Notice on “Valuation of Accommodation provided by Employers”
Employers are expected to disclose details of the accommodation provided to employees; which include:
- The name of the landlord;
- The location of the property;
- The value of the rent paid annually to the landlord; and
- Any other details as may be required from time to time.
LIRS Pubic Notice on “Taxation of Employee Loan”
- Employers are required to file a schedule showing details of their employee loans and the payment terms, alongside employers’ annual returns (Form H1) latest by 31 January every year.
LIRS Pubic Notice on “Allowable Interest Deductions on Owner-Occupied Residential Houses”
- The individual claiming the allowance must provide evidence that he/she occupied the property for at least a 1 year period at the end of the year; and
- The individual must be the verified owner of the house/ property and must have declared the property as owner-occupied in their annual “Claims for Allowances and Relief (FORM A)”.
LIRS Pubic Notice on “Taxation of Employees Share/ Stock Options”
- Every employer is required to file, alongside their annual returns, a schedule showing the information on its employees share options.
LIRS Pubic Notice on “Exemption of Compensation for Loss of Employment”
- Terminal benefits should not be lumped under the heading of compensation for loss of employment;
- Employers should show each pay component and the corresponding payments in their tax returns to enable the LIRS determine the correct tax treatment;
- Employers are required to notify the LIRS of payments for compensation for loss of employment and who those amounts were paid to.
LIRS Pubic Notice on “Tax Relief on Voluntary Pension Contributions”
- On an annual basis, individuals claiming tax relief on their voluntary pension contributions, must submit alongside their income tax returns, a copy of their Retirement Savings Accounts (RSA) statements for the relevant tax year and any other period requested by the LIRS.
LIRS Pubic Notice on “What Constitutes Reasonable Removal Expenses for the Purpose of Tax Exemption”
- The following documents/ details must be kept, to substantiate the removal/ relocation expenses:
- the name and address of the employee;
- the date of the relocation/ removal;
- the reason for the removal/ relocation; the distance (km) involved;
- and receipts to vouch the actual expenses.
In order to obtain certainty for removal expenses and temporary subsistence allowance, corporates and business enterprises may submit their staff policy and guidelines as well as their per diem rates for pre-approval by the LIRS.
LIRS Pubic Notice on “PAYE and WHT on Employee Outsourcing and Other Labor Brokerage Arrangements”
- Outsourcing firms are liable for the deduction of PAYE on employees’ incomes and filing of the annual tax returns.;
- Notwithstanding, the ultimate employer must ensure that the PAYE obligations for its outsourced employees are appropriately discharged by the outsourcing firm;
- While sending invoices to the ultimate employer, the outsourcing company should state separately, the outsourcing or management ‘fee’ portion and the ‘employee salary’ portion of the total invoice, to enable WHT deduction only on the ‘fee’ portion; and
- The outsourcing company must be able to provide justification for the ‘employee salary’ portion of the invoice by keeping appropriate records. It must also be able to account for full PAYE payment by all affected employees.
LIRS Pubic Notice on “Taxation of Non- Nationals with a Temporary Work Permit”
No additional filing obligation.
The full details and our explanations of these public notices can also be found on here our blog- www.vi-m.com/blog.