The landscape of tax obligations for employers in Nigeria has undergone a significant shift concerning the Pay-As-You-Earn (PAYE) system. Employers across the nation face unprecedented pressure to tighten payroll compliance, driven by substantial administrative penalties. The new regime, including a steep 40 percent PAYE penalty in Nigeria for non-compliance, transforms payroll errors into material financial risks, demanding robust re-evaluation of internal controls and reporting processes.
This intensified enforcement stems from the Nigerian Tax Administration Act (NTAA) 2025, expanding employer liability under the PAYE system. Section 105 stipulates that any entity failing to deduct, collect, or withhold tax will incur an administrative penalty of 40 percent of the un-deducted sum. This provision is a powerful incentive for businesses to ensure meticulous adherence to tax regulations.
Financial repercussions extend beyond the initial 40 percent penalty. Section 107 of the NTAA 2025 details that if tax is deducted but not remitted by the 21st day, the employer is liable for outstanding tax, a 10 percent per annum administrative penalty, and interest at the CBN monetary policy rate. This highlights the critical distinction between a PAYE penalty vs interest Nigeria employers face, emphasizing compounding financial burdens for late remittances.
What is PAYE penalty in Nigeria? The PAYE penalty in Nigeria refers to administrative
