Usually, the gross salary on an employment contract differs from the monthly salary which an employee receives. Our earlier article on payroll and statutory contributions in Nigeria provides an analysis of the various requirements. One of the payroll obligations that reduce net pay is Pay-As-You-Earn (PAYE) tax. BRC online PAYE tax calculator, Nigeria, and guidelines below will assist taxpayers estimate the annual and monthly payroll tax.
The calculator is valid for employment income up till 31 December 2020. It can also be used to calculate Nigerian payroll tax until the end of 2020.
Online PAYE tax calculator (Nigeria) with changes in Finance Act 2020 is effective 1 January 2021.
Please note the following points:
- The calculator is per person.
- Currency: The currency of the taxable income band is in Nigerian Naira. Where an employee’s salary is provided in a foreign currency, you must convert the salary to Nigerian Naira before using this calculator.
- Cash and non-cash pay: Annual employment income includes any salary, income, fee, bonus, gain as well as benefits in kind of an employee.
- Pension: Gross emolument is a minimum of basic, housing, and transport allowance (BHT). This calculator uses the mandatory pension contribution of BHT * 8% for an employee. Where the gross emoluments include other allowances as well as BHT, you may insert the excess amount in the section for a voluntary contribution.
For instance, Mr. Ade Osagie has an annual BHT of NGN4million and other allowances of NGN3m. Mr. Osagie contributes only a mandatory pension and ticks the box. BRC online PAYE tax calculator will calculate MPC of NGN320,000, that is, 0.08 * NGN4m. However, Mr. Osagie uses gross emoluments of his entire employment income of NGN7m. The actual contribution is NGN560,000 (NGN7m * 0.08). BRC recognizes the possible alternatives to BHT and recommends that users insert any amount above BHT * 8% as an additional contribution. In the case of Mr. Osagie, the figure is NGN240,000 (NGN560,000 – 320,000). - Life insurance premium: Insert the premium paid on a personal life insurance policy.
- The Nigerian tax authority usually requires evidence of remittance to the regulatory body before a taxpayer claim relief on statutory contributions.
You can download a one-page summary of the different payroll deductions in Nigeria here.
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