PAYE Deductions Are Not Enough: Key Compliance Gaps Organizations Must Address in Nigeria

As organizations commence a new financial year, it is imperative to take a strategic look at statutory compliance obligations particularly those related to employee taxation. While many employers consistently deduct and remit monthly Pay-As-You-Earn (PAYE) taxes, a key compliance requirement is often overlooked: the Annual PAYE Returns Filing. Annual filing is not merely an administrative formality; it is the statutory confirmation of an employer’s year-round PAYE compliance. A clear understanding of filing requirements, deadlines, and the risks associated with non-compliance ensures that organizations maintain robust governance practices and avoid unnecessary penalties.

What Exactly Is the Employer Annual PAYE Returns Filing?

Annual PAYE returns provide the State Internal Revenue Service (SIRS) with a consolidated record of an organization’s payroll-related tax activities for the entire fiscal year. These returns typically include:

A comprehensive list of all employees on the payroll

Total emoluments paid to each employee

Pension and other statutory deductions

Monthly PAYE deductions and remittances

Why Does It Matter?

For Relevant Tax Authorities:
It is a key tool for reconciling monthly PAYE remittances, validating employer compliance, and maintaining accurate taxpayer records.
For Employees:
Accurate annual filings ensure that their tax contributions are correctly documented—supporting applications for Tax Clearance Certificates (TCCs), banking transactions, employment verification, contract bidding, and visa processing.

Monthly deductions alone do not constitute full compliance. The annual filing is the formal legal confirmation of PAYE deducted and remitted through the year.
Statutory Deadline: 31 January

The Nigeria Tax Administration Act (NTAA) 2025 retains the long-standing statutory deadline of 31 January following the assessment year for filing annual PAYE returns. This deadline is fixed and not subject to extension.

Timely filing:

Confirms compliance with the law.

Prevents administrative escalations by tax authorities.

Facilitates the prompt issuance of TCCs to employees.

Missing the deadline, even by a short period, exposes organizations to penalties under Section 101 of the NTAA 2025.

Penalties for Late, Incorrect, or Incomplete Filing

Under Section 101 of the NTAA 2025:

₦100,000 penalty for the first month of default

₦50,000 for every subsequent month until compliance is achieved

These penalties are administrative and not punitive; but they can accumulate quickly, resulting in unnecessary financial burdens. Early preparation and filing remain the most cost-effective strategy.

The Compliance Challenges Many Organizations Overlook

Even organizations with strong compliance cultures may encounter challenges such as:

Incomplete employee records (e.g., missing TINs or biodata)

Delayed year-end payroll processing, especially in December

Third-party payroll errors arising from outsourced service arrangements

Lack of awareness, many companies assume monthly PAYE remittance alone is sufficient

Most of these issues are preventable through early planning and enhanced data governance.

Practical Steps to Strengthen Compliance

Employers can improve the filing process by taking the following actions:

Audit payroll records early to confirm accuracy and completeness.

Verify employee Tax Identification Numbers (TINs) to avoid submission delays.

Reconcile monthly PAYE filings with year-end totals to ensure consistency.

Engage payroll teams and service providers ahead of time, reinforcing expectations.

Submit returns well before 31 January to avoid the rush and mitigate risks.

These steps help eliminate errors, reduce pressure, and ensure seamless compliance.

Beyond Compliance: Why Timely Filing Truly Matters

Annual PAYE filing offers benefits that extend beyond legal requirements:

Employees: Accurate tax records ensure the facilitation of certain key personal and professional transactions.

Employers: Enhance their corporate governance profile and reinforce stakeholder confidence.

State tax authorities:  Improve revenue planning and maintain reliable taxpayer databases.

Timeliness reflects organizational professionalism and strengthens trust among employees, regulators, and business partners.

Conclusion

Annual PAYE returns filing remains a vital obligation under Nigerian tax law. Whilst monthly PAYE deductions are fundamental, they are not a substitute for the statutory annual filing that confirms compliance for the entire year. The 31st of January deadline and the penalties outlined in the NTAA 2025 underline the importance of proactive planning, not to intimidate organizations, but to encourage best-practice governance. With early preparation, accurate data management, and a proactive compliance strategy, organizations can meet their obligations seamlessly supporting their workforce, enhancing their reputation, and maintaining regulatory peace of mind.

Start the financial year on a compliant foundation. It is smarter, safer, and ultimately more professional.

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