Pay-as-You-Earn and Payslip

Pay-as-You-Earn and Payslip

Pay-As-You-Earn (PAYE)

Pay-as-you-earn is a tax deducted from employee salary account. The remittance of this tax is on or before the 10th day of the month following the month in which salaries were paid. See relevant sections of the Personal Income Tax Act (PITA). (S.81 of Personal Income Tax Act Cap P8 LFN 2011). S. for details

Taxable Entitlement (Gross)

This is the total amount your employer pays their employee as salary, including all benefits arising from employment. Another name to call taxable entitlement is Gross Emoluments. These include wages, salaries, allowances including benefits in kind, gratuities, superannuation and any other incomes derived solely because of employment.  Regardless, it is essential to note that all allowances are taxable except those reimbursements of employee expenses. However, if such reimbursements are carried out through the employee payslip, they must be subjected to tax in Nigeria. Such reimbursements include training costs, transport to attend training, etc.

Moreover, Section 33(2) of finance-act-2020 defined “gross income” as income from all sources, less non-taxable income, and tax-exempt items.

Table 1 showing the comparison of old PITA and Proposed PITA of an employee who earn N5,775,000 as gross salary.

TAX RELIEF (TAX ALLOWANCE)

This is amounts that can be deducted from a person’s annual income to reduce the amount on which tax is paid. Or the amount of youThese amounts can be deducted from a person’s annual income to reduce the tax paid.  In other words, it is the amount of your income exempt from tax aside from other statutory deductions.

  • Maximum of Personal relief               ₦ 800,000.00
  • Rent Relief of lower of N200,0000 or 20% of actual rent paid.

Table 2 shows that Tax relief of old and proposed method

Tax Exempt

The tax law provides certain payroll deductions as tax exempt or non-taxable deductions.  Tax exempt amount has to be removed from Gross taxable Income (earnings) before applying the tax rules to determine tax. The following deductions are not Taxable (.i.e. Tax Exempts):

  • Union due is 2% of the basic salary.
  • Pension Deductions (employer 10% and employee 8% of Basic salary, transport and housing allowance).
  • National Housing Fund Deductions (Employee 2.5% of basic salary).
  • Life Assurance Payments (this is obtained from the employee life policy document and monthly premium payment receipt is sufficient evidence to earn the tax exempt. Section 33(3) of Finance Act 2020 added that any premium payment. stated that there shall be allowed a deduction of annual amount of any premium paid by the individual during the year preceding the year of assessment to an insurance company in respect of insurance on his life or the life of his spouse or of a contract for a deferred annuity on his own life or the life of his spouse (finance-act-2020). This is addition to the Act.
  • The National Health Insurance Scheme (Government 10% and employee 5% of basic salary) but employer 5% has not be implemented yet in the federal government MDAs due to Labour objections.
  • Gratuity.



Table 3 showing the tax exempts for both the old and proposed.


Table 3 shows same amount since the figures are based on same sources


Tax Table

After the relief allowance and tax exemptions have been granted, the income balance shall be taxed as specified in the tax table below. Moreover, the Nigerian Payroll tax table comes in annual gross bands in six rows. Each band has a percentage tax value attached to it. The tax table rates must be applied to the Net Taxable Income to get Tax Payable.

Tax table and Rates from November 2024 tax year (As amended)

First N800, 000 @ 0 per cent

Next N2,200, 000 @ 15 per cent

Next N9,000, 000 @ 18per cent 

Next N13,000,000 @ 21 per cent

Next N25,000,000 @ 23 per cent

Above N50, 000,000 @ 25 per cent

Taxable Income (Net)

This is derived after deducting the following from Gross Taxable Income. Some are extracted from payslip.

  • Gross Entitlement,
  • Tax Exempts, and
  • Tax Relief (Tax Allowance).
  • Apply tax table to the net amount as stated above

Table 4 showing the tax band of the old and the proposed method

Residency Rule

Assuming the Senior Manager who stay in Rivers State but work in Abia State. By residency rule, an employee’s PAYE is payable to the tax authority of the state of his/her residence (Rivers State). It is therefore the duty of the employer to deduct and remit it to the tax authority where the employee is resident. However, if the employee is resident in Rivers State, the tax authority that is entitled to his PAYE is the Rivers State Board of Internal Revenue.

Usually, non-residents are not liable to pay taxes in Nigeria. However, an expatriate employee may be liable to tax in Nigeria if;

Penalty for Failure to Deduct PAYE

Section 74(1) of Personal Income Tax Act, 2011 states “ any person or body corporate who fails to deduct, or having deducted, fails to remit such deductions to the relevant tax authority within 30days from the date the amount was deducted or the time the duty to deduct arose, shall be liable to a penalty of an amount of 10% of the tax not deducted or remitted in addition to the amount of tax not deducted or remitted plus interest at the prevailing monetary policy rate of Central Bank of Nigeria.

Exemption of Minimum Wages Earners

Section 37 of Finance Act 2020 “provided that minimum tax under this section or as provided for under the Sixth Schedule to this Act shall not apply to a person in any year of assessment where such person earns the National Minimum Wage or less from an employment (finance-act-2020).

Books of Accounts

Section 12 of PITA 2011 stated that the keeping of bools of accounts is very important but if any taxable person fails or refuses to keep account, such a person shall be liable on conviction to a penalty of N50,000 for individuals and N500,000 for corporate entities.

Employer File Tax Returns on Behalf of Their Staff.

Every employer is to file annual forms on behalf of their employer called Form H1 and Form A. Also, form H1 is an annual employer’s tax return that shows the names, annual gross income and PAYE taxes of employees in the past tax year together with Form G.  Meanwhile, Form G gives information of the annual PAYE paid and the corresponding receipts. The tie to fill Form H1 is on the 31 January of the following year. Therefore, Form A is an annual statement of individual income and claims for allowances and reliefs form. Moreover, the right time to submit is on the 31st of March of the current year.

Conclusion

As an employer, you are responsible for ensuring full compliance with the guidelines set forth by the relevant tax authority concerning calculating your employee’s PAYE (Pay As You Earn). This applies accurately choosing the amount of PAYE to be deducted from each employee’s salary based on their earnings and applicable tax rates.

Furthermore, your civic duty is to remit the PAYE amounts deducted from your employee’s wages to the relevant tax authority promptly and within the specified deadlines. This not only sustains government services but also helps in fulfilling your legal obligations as an employer. Additionally, you must pay any other taxes owed to the relevant tax authority on time to avoid penalties and ensure that your business remains in good standing. Maintaining correct records and staying informed concerning tax regulations will enable you uphold these responsibilities effectively.

Dr. Friday Ojeaburu FCA

ohimaiconsulting@yahoo.com

Cooperative Accounting

Co-operative society and accounting system.

Cooperative accounting is the applications of financial accounting principles, concepts and policies to cooperatives in order to ascertain its financial position, promote accountability, efficient management and ensure viable operations of co-operative financial resources.

In other words, the accounting system and bookkeeper accurately record and report the cooperative’s daily business transactions.

Furthermore, the cooperative law makes the keeping of proper sets of accounting records and the preparation of the final accounts compulsory for every registered cooperative society and sets of information that must be disclosed in the final account.

Moreover, the cash books and receipts are source documents, while income and expenditure accounts and balance sheets are final accounts.

ACCOUNTS AND RECORDS OF COOPERATIVE ACCOUNTING.

1.MEMBER’S PASSBOOK

Member’s passbook is opened for every member which serves as a personal account on which all transactions between a member and the society are recorded. Moreover, below is the front- and back-page sample of members passbook.

Sample of members; passbook showing front page and back page of document used in cooperative accounting.

2. ANALYSIS BOOK

Also, analysis book is use for recording members’ contributions, loan disbursed and repayment, membership withdrawal, fine and other incomes on monthly basis. However, this book helps to analyse the transaction on a monthly basis. In addition, this book help cooperative to always spread open in front of members at any general meeting of the society.

Sample of Analysis book were various income received by cooperative are analyzed. It is one key document used in cooperative

3. PERSONAL LEDGER

Personal ledger helps to record member’s contributions of shares, savings, deposits, withdrawals, loan and refunds. In addition, the entries into this book are from the individual’s entries in the analysis book which is also entered in the passbook. With proper recording of transaction, individual cash balances can be seen at a glance.

Sample of personal ledger that shows the total contribution by each member and also their balances. it is one key document used in cooperative

4. LOAN REGISTER

Obviously, Loan register is a source document containing information regarding all loans granted at any time. In addition, such information includes membership personal number; member identity number; committee meeting minute number; cheque number. Also, includes amount authorized and approved; amount applied for and granted; date of approval and refund; period of the loan.

Sample of Loan register used as a key in cooperative accounting.

5. CASH RECEIPT

Also, cash receipt helps to record all money received in cash or in cheque. Also, it is financial transactions used as supporting evidence that money have been received on behalf of the society. Moreover, all receipts must be serially numbered and used in that order.

Sample cash receipt used in cooperative

6. CASH BOOK

Moreover, a cash book is a financial record that shows all cash receipts and disbursements, including bank deposits, withdrawals, and balances.

Cask book used in cooperative accounting

7. INDIVIDUAL MEMBERS’ CONTRIBUTION

Additionally, in co-operative management, recording all transactions and producing financial statements on time is important. Clearly, these statements are the output based on each member’s contributions. By tabulating each member’s share and savings contributions in the individual contribution table, it’s easy to see the breakdown of each member’s contributions. Column A shows the fraction of each member’s share contribution, while column B shows their savings contribution.

8. GENERAL LEDGER

A general ledger is a cooperative financial record-keeping system that uses debit and credit account records. It can validate a trial balance, such as bank charges, telephone, and travelling expenses and asset account.

general ledger used in cooperative accounting

9. INCOME AND EXPENDITURE ACCOUNT

The Income and Expenditure Account summarises all the income and expenses incurred during the current accounting year. Its primary objective is to calculate the surplus or deficit. However, cooperatives only declare surplus or deficit, not profit or loss, since they are exempt from paying taxes.

income and expenditure account,  cooperative accounting

10. STATEMENT OF FINANCIAL POSITION

A balance sheet is a financial statement that shows a company’s assets, liabilities, and equity on a specific date. It summarises the business’s overall value at a particular time, like a snapshot.

statement of financial position, Cooperative accounting

11. CASH FLOW STATEMENT

In addition, a cash flow statement is a financial record that presents a company’s incoming and outgoing cash for a specific period. This document shows the cash flows, the money that comes in and goes out of the business. Cooperative uses these statements to keep track of, document, monitor, and report these transactions.

 cash flow statement, cooperative accounting.

CONCLUSION

Therefore, cooperative laws around the world require the maintenance of proper accounting records. However, seeking assistance from experts with practical experience can help improve your cooperative accounting system. Furthermore, if you are looking for the best way to manage a cooperative society, consider purchasing a revised cooperative book from our book-shop or at Amazon.com.

Download free Excel financial model designed for cooperative accounting management.

If you are facing any issues related to the financial model, please feel free to contact me for consultancy services.

Alternative Dispute Resolution in Nigeria.

Top Alternative Dispute Resolution (ADR) in Nigeria.

Alternative Dispute Resolution in Nigeria is practiced within Nigeria at the institutional and individual level with and without the involvement of the court system

The list of institutions that practiced ADR in Nigeria, namely, The Chambers of Commerce, private enterprises, industry groups etc. In the case of individuals are judges, specially trained practitioners (i.e. arbitrators, mediators, accountants), elders, traditional rulers, chiefs, religious leaders. 

The practitioners involved in ADR is industry-specific that have technical expertise in specific areas like environmental disputes, labour disputes, family law, etc.

Furthermore, the current Nigerian laws have sufficient provisions that have addressed Alternative Dispute Resolution in Nigeria and the methods in resolving disputes.

These provisions of the laws are discussed below.

(1) The 1999 Constitution

The Constitution is the supreme law of the land that endorses arbitration. Section 19(d) of the Constitution states that part of Nigeria’s foreign policy objective is respect for international law and treaty obligations. Nigeria also seeks for settlement of international disputes by negotiation, mediation, conciliation, arbitration and adjudication.

(2) Arbitration Laws

Nigeria, like other progressive countries, has subscribed to many international ADR Laws and Rules. The United Nations Commission on International Trade Law (UNCTRAL Model Law of 1985) and UNCITRAL Arbitration Rules domesticated in Nigeria under the Arbitration and Conciliation Act (ACA).

(3) Other Federal Acts

Nigerian body of laws is replete with several statutes that provide for arbitration or other ADR mechanisms. However, a fewer list is mentioned below of the law and the applicable sections: 

  1. Sections 11 and 30 (4) of the Matrimonial Causes Act (Cap. M7 LFN 2004). This section talks about reconciliation between the husband and wife or parties. As they can get the Marriage conciliator to take an oath of secrecy to settle out of court.
  2. section 2, Consumer Protection Council Act, (Cap C25 LFN 2004), 
  3. sections 29 and 33, of the Environmental Impact Assessment (EIA) Act (Cap. E12 LFN 2004), 
  4. Sections 4, 8, 9, 20, 22 of the Trade Disputes Act (Cap. T8 LFN 2004), 
  5. section 11 of the Petroleum Act(Cap. PI0 LFN 2004), 
  6. section 26 of the Nigerian Investment Promotion Commission Act, (Cap. N17 LFN 2004); 
  7. section 27 of the Public Enterprises (Privatization and Commercialization) Act, (Cap. P38 LFN 2004), 
  8. section 22 of the Nigerian LNG (Fiscal Incentives, Guarantee and Assurance) Act (Cap. N87 LFN 2004), 
  9. Section 49 of the Nigerian Co-operative Societies Act (Cap. N98 LFN 2004); 
  10. section 5 of the National War College Act (Cap N82 LFN 2004); 
  11. sections 3 and 6 of the National Boundary Commission, Etc. Act; (Cap. N10 LFN 2004), 
  12. section 3 of the Advisory Council on Religious Affairs Act (Cap. A8 LFN 2004); 
  13. section 4 of the National Office for Technology Acquisition and Promotion Act( Cap. N62 LFN 2004), 
  14. section 4 of the Nigerian Communications Commission Act (Cap. N97 LFN 2004) etc.

(4) Court Laws and Rules

Lastly, Court laws and rules govern procedures and proceedings for the conduct of business in the court.

Top 55 Balance Sheet Keywords

Top 55 Balance Sheet Keywords

Top 55 balance sheet keywords relevant to business. It all started from account receivables to total non-current liabilities

Top 55 balance sheet keywords are available below.

1. Account Receivables

2. Account Payables

3. Accrual

4. Asset

5. Accumulated Depreciation

6. Bank Account

7. Bank Overdraft

8. Bill Payable

9. Cash and Cash Equivalents 

10. Computer Software

11. Copyrights 

12. Current Asset

13. Current Liabilities(within 1year) 

14. Current tax payable( Unpaid Tax)

15. Customer Lists.

16. Deferred tax 

17. Development Cost

18. Dividend payable(Unpaid Dividend)

19. Equity

20. Furniture and Fixtures

21. Goodwill 

22. Intangibles Noncurrent Asset 

23. Inventories 

24. Investments in Associates 

25. Investments in Equity Instruments 

26. Land and building

27. Liabilities 

28. Long-term Asset.

29. Long-term Borrowings 

30. Long-term Provisions 

31. Mortgage Payable 

32. Motion Picture Firm 

33. Net Assets 

34. Net Worth

35. Non-Controlling Interest 

36. Non-current Liabilities (over one year) 

37. Non-current Asset

38. Notes Payable 

39. Other Components Equity 

40. Other Current Assets 

41. Other Intangible Asset           

42. Patents

43. Prepaid

44. Property, Plant and Equipment

45. Retained Earnings 

46. Salary Payable

47. Share Capital 

48. Share part of Long Term Borrowings 

49. Short Term Borrowings (Short-term debt)

50. Short term provisions 

51. Tangible Non-current Asset 

52. Trade Mark

53. Total Assets 

54. Total current liabilities

55. Total Non-current liabilities    

Moreover, to get more Top 55 balance sheet keywords, get in touch with us

Accounting Tools Relevant for Freelancers

Accounting tools Relevant for freelancers.

Introduction

Accounting Tools Relevant for Freelancers should be easy to use since several freelancers don’t have wide accounting knowledge.

As a freelancers it is however, essential that they know what accounting tools all are about. Accounting Tools are software that enables businesses to track and record financial activities in compliance with legal and taxation regulations.

It integrates several source documents like purchase order, invoice, bank reconciliation statement and so on together in one place. Also, because they have more valuable things to do than keeping accounting records. Moreover, they should have essential accounting functions, like expense tracking.

Furthermore, the only features useful to freelancers are tax calculation, mileage tracking, tracking number of orders. In addition, invoice tracking and having the accounting tools on cloud-based, which makes it easier for freelancers to manage.

How much money can freelance professionals make per year?

If you’re interested in freelancing, various types of work are available. Typically, professions that require more technical skills can earn more for freelancers.

In USA, there are 57 million freelancers’ (51%) say no amount of money can entice them to take traditional job. They enjoy the following.

  • Flexibility and
  • Ability to work and stay in any location.

CNBC report shows that the average hourly rate and annual salary for most in-demand freelancing jobs as stated below. This article put forward 13 professional freelancers with average hourly expectations..

  1. Writers: On average, a freelance writer earns $30-40/hr or around $42,000 annually.
  2. Editors: Freelance editors usually earn around $25 to $35 per hour, an average yearly salary of approximately $40,000.
  3. Programmers: Freelance programmers across different languages earn $60-70/hr or $120,000 annually.
  4. General developers:  A freelance developer typically charges $50-60 per hour, earning an annual salary of around $100,000.
  5. Mobile developers: Also, Mobile app developers typically earn an hourly rate of $55-65 as freelancers, equating to an annual salary of $100,000.
  6. Web developers: Freelance web developers earn an average of $90,000 annually by designing and creating websites at an hourly rate of $50-60.
  7. Graphic designers: A freelance graphic designer typically charges $40-45 per hour, earning an annual salary of around $90,000.
  8. Transcribers: Freelance transcriptionists can also earn an average of $20-25 per hour, adding to a yearly salary of around $32,000.
  9. Online marketers: Freelance digital marketers typically earn an hourly rate of around $50, resulting in an approximate annual salary of $100,000.
  10. Photographers: A freelance photographer has an hourly rate between $35-45/hr, with an annual salary of around $42,000.
  11. CRM managers: A customer relations manager (CRM) expects to make between $50 to 60/hr, with an year salary of approximately $120,000.
  12. Data analysts: A freelance who specialises on data analyst earn between $55 to 65/hr, annual salary of $100,000.
  13. Bookkeepers: Lastly, an individual who works as a freelance bookkeeper usually earns an hourly rate of $30 to $35, which translates to an annual salary of approximately $40,000.

8 Accounting Tools Relevant for Freelancers

As businesses increasingly expect growth, they must have accounting tools that cater to the needs of freelancers and content creators.

These accounting tools will help freelancers meet their business needs and fulfil their obligations to the government. With the growing demand, the average hourly wages of freelancers  can also increase, and proper data capturing becomes crucial.

  • QuickBooks

Two QuickBooks products are actually useful as Accounting Tools Relevant for Freelancers. They are QuickBooks self-employed and QuickBooks Online Simple Start.  

  • Wave

Similarly, Wave’s accounting software streamlines invoice and cash flow management, allowing entrepreneurs to focus on business growth.

  • Zoho Books

One of the best overall accounting tools important for freelancers. Zoho Books is an online accounting software that streamlines financial management, automating business workflows, and enables seamless collaboration across departments.

  • Freshbooks

FreshBooks provides time-saving tools to run your small business efficiently

  • ZipBooks

ZipBooks is a robust platform that simplifies the management of your business with its beautiful and intuitive interface.

  • Trulysmall Accounting

This tool streamlines invoicing by centralizing invoice creation, branding, previewing/sending, and receipt.

  • Freeagent

This tool is designed for freelancers to track and analyze their finances.

  • Fiverr workspace

Fiverr Workspace Blog provides effective payment and back-office management resources for small businesses and freelancers.

  • Bonsai

Freelancers will earn money, receive payments and also have debtors owing them for their services. Appropriate bookkeeping skills will always stand as the key difference between a performing or non-performing freelancing business.

Important of Accounting Tools Important for Freelancers

This a freelancers keeping records using accounting software

Source: Canvas.

  1. First, it makes them to keep track of incomes and expenses..
  2. It makes them to staying on top of all invoicing issues
  3. In addition, it makes them to keep accurate records for tax payment
  4. It makes them to appreciate the work of an accountant and auditor
  5. Also, is ensures the timely monitoring of daily business tasks and activities
  6. It provides  freelancers on how to take charge and defend business assets when bad times strike.
  7. Improves cashflow
  8. It makes  freelancers to be motivated of their performance
  9. It also protects  freelancers against the legal consequences of not keeping accurate records for tax purpose.
  10. It makes  freelancers to be more efficient
  11. It makes their work and reports to be more professional
  12. Lastly, it makes them to be organised and able to budget for the future earnings and expenses.

Conclusion

It is essential for every writer who earn income to be familiar with the accounting tools. Also, to submit documents come tax time and annual report to monitor financial performance. In addition, if you need help, there are many step-by-step tutorials on YouTube or contact ohimai consulting.