August 3, 2021

SB-Accounting

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Meaning and Forms of Employment base on PITA

Meaning and Forms of Employment base on Personal Income Tax (PITA)
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Aside from contracts for or of employment, employment can be local/Nigeria or foreign. When you examine it this way, the problem becomes which tax authority will collect taxes from the employee? Also, residence issues become more vivid. Let’s see how this goes.

Definition of Employment

1. According to the Institute of Chartered Accountants of Nigeria (ICAN) employment is an agreement between an employer and an employee that the employee will provide certain services on the job and the employer’s designated workplace.
2. It can as well be defined as the arrangement between employer and employer in which the employee is expected to perform certain jobs based on the terms and job description of the employer.

Types of Employment

Local/Nigeria Employment. That is the employment of the indigenes or citizens of a country.  to paragraph 1 of the sixth schedule of the Personal Income Tax Act 2011 as amended. “Nigeria employment means any employment, not being foreign employment, the duty of which were wholly or partly formed in Nigeria.” This is by paragraph 1 of the sixth schedule of the Personal Income Tax Act 2011 as amended.

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Foreign Job. This means a Nigerian or a citizen performing jobs outside of the country’s national boundaries. It’s different from expatriates who are foreigners doing jobs in Nigeria. According to the Act, it is an “employment the duties of which are wholly or partly performed outside Nigeria save during any temporary visit of the employee to Nigeria.

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Tax issues regarding the types of Employment

For Nigeria, the employer’s tax liability is paid based on the place of residence. But not the place of work of the employee. An employee working in Lagos, Nigeria, and living in Ogun state will pay tax to Ogun state internal revenue service. Although, he received his or her salary from the workplace in Lagos. However, an individual who is an employee in the military pays taxes to the federal government.

Nigerians in foreigners residing outside the country are not expected to pay taxes to Nigeria. However, expatriates who work and live in Nigeria for one year (including their annual leave and temporary period of absence) pay taxes to the country. However, if he has lived in the country less than a period or periods of 183 days (including annual leave and temporary period of absence) his tax liability is not due in Nigeria.

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He may works for a non-Nigeria employer in Nigeria. Plus, his income may not be fixed-base on the employer in Nigeria. In such a case, he will not pay taxes in Nigeria. Also, if the foreign employee is from a country with a double taxation treaty with Nigeria, he will not pay such liabilities.

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Conclusion

Employment involves a contract between an employer and an employee. The income from it is subject to pay as you earn the tax system in Nigeria. There are Nigeria, foreign and expatriate jobs. In determining if the income is taxable, the residence of the persons considered. In some cases, the number of months he or she has lived in Nigeria may be put into consideration.

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