Nigeria: PAYE tax liability | KPMG | GLOBAL

Nigeria: No PAYE tax liability when workers provided by another

Nigeria: PAYE tax liability

The Tax Appeal Tribunal (Lagos) held that a company was not liable for “pay-as-you-earn” (PAYE)—i.e., employment taxes—for workers who were provided to it by another company during the years between 2005 and 2009. The case turned on the fact that the taxpayer had no employees of its own during the years at issue.


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The case is: StarDeep Water Petroleum Ltd.


At issue was whether the taxpayer company was liable for withholding and remitting to the state tax administration the “pay-as-you-earn” (PAYE) tax on salaries that the taxpayer had paid to workers provided to it by another company for the 2005 and 2009 financial years. Payment of the salaries of these workers was borne by the second company.

In Nigeria’s PAYE regulations, there is a “manager concept” that generally provides that when individuals work under the supervision or management of a person who is not their employer, that supervisor (referred to in the regulations as the “manager”) must: (1) provide information about the workers’ pay to the relevant state tax administration; (2) withhold (deduct) the amount of tax due from the employee’s remuneration; and (3) remit the tax to the state tax administration.

The Lagos state tax administration relied on the “manager concept” to find support for its position that the taxpayer company was liable for the PAYE taxes because the taxpayer was responsible for withholding (deducting) and remitting the PAYE taxes on the salaries of these workers—regardless whether they were or were not its employees. On that basis, the tax administration assessed the taxpayer for the amount of the PAYE taxes.

The taxpayer countered that the PAYE regulations were not applicable during the years in question because the taxpayer did not have any employees of its own during those years. 

Tribunal’s decision

The tribunal considered the arguments of both parties, and found that it agreed with the taxpayer that provisions of the PAYE regulations did not apply during the years at issue. Accordingly, the PAYE tax assessment was discharged.


Read an April 2016 report [PDF 61 KB] prepared by the KPMG member firm in Nigeria

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