March 26, 2018
The deadline for filing PIT returns for the 2017 tax year is 31 March 2018. The requirement to file this return is provided in Section 41(1) of the Personal Income Tax (PIT) Act which mandates all taxable persons to file a return of income for every tax year with the tax authority of the State in which the taxable person is deemed to be resident without notice or demand. Such returns are to be filed within 90 days from the commencement of each tax year.
By virtue of Section 41 of PITA, a taxpayer is required to file, along with the return, a true and correct statement of the amount of income from every source (i.e. earned and unearned income) computed in accordance with the provisions of the PIT Act and the associated regulations. The form of return shall contain a declaration which shall be made by or on behalf of the taxpayer that the particulars given in the return are true and complete.
Although the provision of Section 41 is directed at all taxable persons under the PIT Act, many self-employed persons have failed to comply with the requirements of this section. Furthermore, it has become acceptable for employers to fulfil this obligation on behalf of their employees, in practice. Nonetheless, it is important to note that there is no legal basis for the assumption that the requirements of Section 41 apply directly to employers alone and not employees. Besides, the only category of employees exempted from filing the annual returns, based on the PIT Act, are those whose only source of income is employment from which they earn N30,000 or less in any particular tax year.
It is also important to note that the requirement for employers to file returns of emoluments paid to their employees under Section 81 is different from the requirements under Section 41. Hence, taxpayers who have not complied with the provisions of Section 41 by themselves or through their employers should do so before the expiration of the deadline.
Although the PIT Act does not provide specific penalties for failure to file returns in accordance with Section 41 of the PIT Act, the provisions of Section 94(1) of the Act may apply given its omnibus nature.
Moreover, Section 94(4) of the PIT Act empowers a relevant tax authority (RTA) to institute proceedings or impose penalties of an amount equal to the income tax chargeable on persons who fail to comply with the requirements of a notice given by the RTA under the provisions of Section 41 of the PIT Act.
Given the government’s recent drive for increased revenue collection, it may not be surprising to see tax authorities enforce possible penalties on erring employees, particularly those who have other sources of income apart from their employment income. More so, the coincidence of the deadline for the Voluntary Assets and Income Declaration Scheme (VAIDS) and the filing of annual return of income and claims may just be unusually symbolic.
As the government continues its drive for increased revenue, taxpayers should engage their consultants to ensure compliance with the requirements of the law to avoid potential tax exposures.