AI agents for business finance: what they can and can't do
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The short answer
PAYE for an employee who lives in Lagos goes to the Lagos State Internal Revenue Service (LIRS). The employer deducts it under the 2026 Nigeria Tax Act bands, remits it by the 10th of the following month and files the annual employer return (Form H1) by 31 January, through the LIRS eTax portal. If your Spanish company has no Nigerian entity, an employer of record or a local subsidiary normally carries this duty.
Which state collects the tax
Nigerian PAYE on employment income goes to the state where the employee is resident, not to the state where the employer is based, and certainly not to Spain's Agencia Tributaria. The Twelfth Schedule of the Nigeria Tax Act 2025, as summarised by Streamsowers & Köhn in March 2026, treats an employee as resident in the state of their place of residence on 1 January of the tax year, or on the date they take up full duties if they start mid-year. An employee on leave on 1 January is placed where they lived just before the leave.
So a developer living in Yaba pays to Lagos even if their manager sits in Valencia. If the same person moved to Abuja on 1 March, the year's PAYE would still be due to Lagos, since residence is fixed at 1 January. Where a person has no place of residence in any state, the Act treats the income differently and the Nigeria Revenue Service administers it.
Who has to remit it
The duty sits with the employer that pays the salary through a Nigerian payroll. For a Spanish company, that usually means one of these:
- Your Nigerian subsidiary registers with LIRS as an employer and runs PAYE itself.
- An employer of record employs the person through its Lagos entity and remits on your behalf.
- No Nigerian payroll at all: DLA Piper's August 2026 payroll FAQ notes that an employee living in Nigeria and earning income from a foreign employer is required to register for tax. The person then deals with LIRS directly. This is common in practice for remote staff of foreign firms, but it puts the burden on your employee and does not remove the questions about how the relationship is classified.
Registering and filing on LIRS eTax
LIRS runs its taxpayer services on the eTax portal (etax.lirs.net). TechCabal's April 2026 guide describes Payer IDs with an N- prefix for individuals and C- for corporate taxpayers, and separate log-ins for taxpayers, corporate administrators and consultants. A Lagos employer works through the corporate profile:
- Register the Nigerian company (or confirm your EOR's) on eTax and obtain its C- Payer ID.
- Collect each employee's tax ID; individuals can check theirs on the Joint Tax Board TIN service with their NIN.
- Each month, upload the PAYE schedule (employee, gross pay, reliefs, tax) and pay the total.
- Pay by the 10th of the month after the salary month, the deadline PwC gives for PAYE remittance.
- File the employer's annual return, Form H1, by 31 January. LIRS extended the 2026 deadline once, to 7 February, according to TechCabal; do not plan on an extension in future years.
A Lagos example
Example only, with no rent relief. A customer success lead in Lekki on ₦350,000 a month (₦4,200,000 a year). Employee pension at 8% is ₦336,000 a year, leaving taxable income of ₦3,864,000. Under the 2026 bands: nothing on the first ₦800,000, 15% on the next ₦2,200,000 (₦330,000) and 18% on the remaining ₦864,000 (₦155,520). Annual PAYE is ₦485,520, or ₦40,460 a month to remit to LIRS by the 10th.
If the employee gives a lease or rent receipt, rent relief can reduce this. Under the Act it is 20% of annual rent, capped at ₦500,000, and DLA Piper notes it needs a receipt, a lease or an employer-approved declaration.
Penalties to avoid
DLA Piper summarises the 2026 penalties for employers: failure to deduct PAYE carries a penalty of 40% of the amount not deducted; failure to remit carries 10% plus interest at the CBN rate; late filing of returns starts at ₦100,000 in the first month. Keep every monthly schedule and payment receipt: a Spanish parent's auditors will ask for them too.
New joiners and leavers
Residence is fixed at the start of employment for someone who joins mid-year, so a new hire who starts in Lagos in June is a Lagos taxpayer for that year's PAYE. For a leaver, the employer completes the final month's PAYE and includes the person in the annual return of emoluments, so collect their tax ID and keep their final payslip. If an employee tells you they live in Ogun State but commute to Lagos, the rule points to Ogun, where they reside, not to Lagos.
Where Pryme fits
With a Pryme Business Account, a Spanish company or its Nigerian subsidiary can hold euros and naira, pay net salaries through Payroll, and let the Finance agent prepare the monthly PAYE schedule and a reminder before the 10th; a person approves before anything is paid. For the wider picture, read paying staff in Nigeria from a Spanish company and pension contributions for Nigerian staff.
Questions people ask
Does a foreign company have to pay Lagos PAYE?
PAYE is due to Lagos for employees resident in Lagos. The employer running the Nigerian payroll (your subsidiary or an employer of record) remits it. Where there is no Nigerian payroll, the employee is required to register for tax themselves, per DLA Piper.
What is the LIRS PAYE deadline?
PAYE is remitted by the 10th of the month after the salary month, and the employer's annual return (Form H1) is due by 31 January.
How do I register as an employer with LIRS?
Through the LIRS eTax portal at etax.lirs.net, where corporate taxpayers receive a Payer ID with a C- prefix and upload monthly PAYE schedules.
My employee moved from Lagos to Abuja. Which state gets PAYE?
Residence is fixed on 1 January of the tax year (or the start date for new joiners), so the state where they lived on 1 January collects that year's PAYE.
Sources
- Mondaq (Streamsowers & Köhn): Taxation of employment income under the Nigerian tax reform Acts (11 Mar 2026) · accessed Oct 2026
- TechCabal: How to file tax on the LIRS eTax portal (2 Apr 2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, individual tax administration (reviewed 29 May 2026) · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability (28 Aug 2026) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria, taxes on personal income (reviewed 29 May 2026) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): Understanding personal income tax under the Nigeria Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.