AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
PAYE in Nigeria goes to the tax authority of the state where the employee lives, not the state where the employer is based. Under the Nigeria Tax Act 2025, as summarised by Streamsowers & Köhn, an employee is resident in the state of their place or principal place of residence on 1 January of the tax year, or on the day they start work if they join later. A Lagos office with staff living in Ogun State pays their PAYE to Ogun.
The rule in one line
Personal income tax, including PAYE on salaries, is a state tax for most residents. The Nigeria Tax Administration Act 2025 section 3(2) gives each State Internal Revenue Service the administration of tax on resident individuals, while section 3(1) reserves certain groups to the Nigeria Revenue Service, such as members of the armed forces and police, Foreign Service officers and non-residents. Which state gets an employee's tax depends on that employee's residence, which is why an employer with one office can owe PAYE to several states.
How residence is decided
Streamsowers & Köhn's overview of employment income under the reform Acts (11 March 2026) describes the Twelfth Schedule of the Nigeria Tax Act this way:
- An employee is resident in the state where they have their place or principal place of residence on 1 January of the tax year.
- If they start employment during the year, the relevant date is the day they take up full duties.
- If they are on leave from Nigerian employment on 1 January, residence is taken from where they lived just before the leave started.
- If they have no place or principal place of residence in any state, they are treated as holding a foreign employment and the Nigeria Revenue Service administers their tax.
The rule looks at where the employee lives. Where the office is, where the company is registered and where the salary is paid from do not decide it.
Common situations
| Situation | Which authority (information only) |
|---|---|
| Office in Lagos, employee lives in Lagos | Lagos State Internal Revenue Service |
| Office in Lagos, employee lives in Ogun and commutes | Ogun State Internal Revenue Service |
| Office in Abuja, employee lives in Nasarawa | Nasarawa State Internal Revenue Service |
| Employee moves from Ogun to Lagos in June | Ogun for that tax year, based on residence on 1 January; Lagos from the next year |
| New hire starting in March, living in Rivers | Rivers, based on residence on the start date |
| Employee living abroad with no residence in any state | Nigeria Revenue Service, if Nigerian tax applies at all |
PwC's individual tax administration summary, reviewed in May 2026, lists FCT residents among those handled by the federal tax service; check the current position with the FCT Internal Revenue Service if you have staff living in Abuja.
What this means for an owner abroad
Register with each state
Your business needs to be registered as an employer with each state tax authority where your staff live, and to remit each employee's PAYE to the right one. Lagos uses its eTax portal, with corporate payer IDs prefixed "C-", according to a TechCabal guide from April 2026; other states have their own portals or bank collection routes. Keep a staff address record and ask employees to confirm their home address in writing each January.
Deadlines and returns
PwC says PAYE is remitted by the 10th of the month after salaries are paid; the 2025 Administration Act section 107 runs penalties after the 21st. Pay by the 10th to be safe and confirm with each state. Section 14 of the same Act requires an annual return of all emoluments by 31 January for the previous year, which you file with each state for its employees.
Worked example (illustration only)
A cleaning company in Ikeja has 12 staff: eight live in Lagos and four in Ogun. Total monthly PAYE is ₦180,000, of which ₦125,000 relates to the Lagos residents and ₦55,000 to the Ogun residents. The company makes two remittances each month, ₦125,000 to Lagos and ₦55,000 to Ogun, and files two annual returns in January. Paying the whole ₦180,000 to Lagos would leave the Ogun liability unpaid and expose the company to the penalties for failure to remit, even though the money was paid somewhere.
Why the right state matters
Section 107 of the 2025 Administration Act treats tax deducted but not remitted by the 21st of the following month as owed with a 10% annual penalty plus interest at the Central Bank's monetary policy rate, and on conviction allows imprisonment of up to three years. A remittance to the wrong state does not count as remitting to the right one, so the state that is owed can pursue the full amount while you try to recover the misdirected payment.
Staff who work remotely
Remote staff in another state are taxed by the state where they live, in the same way. Staff who move abroad are a separate question that turns on Nigerian tax residence; see whether a Nigerian employer deducts PAYE for staff abroad. The current PAYE bands are on The Ledger at Nigeria PAYE tax bands for 2026.
Where Pryme fits
On a Pryme Business account, Payroll and the Finance agent can prepare separate remittances for each state from one payroll run, with a person approving above a set ceiling. The Compliance agent can keep each state's deadline in view.
Questions people ask
Do I pay PAYE to the state where my office is?
Not necessarily. PAYE goes to the state where each employee lives, based on residence on 1 January or their start date.
My staff live in Ogun but work in Lagos. Where does PAYE go?
To Ogun State, because residence decides it.
What if an employee moves state during the year?
Under the residence rule as summarised, residence on 1 January governs that tax year; the new state takes over from the next year.
Who collects PAYE for an employee with no home in any state?
The Nigeria Revenue Service, according to the Twelfth Schedule as summarised by Streamsowers & Köhn.
Sources
- Streamsowers & Köhn via Mondaq: Taxation of employment income under the Nigerian tax reform Acts (11 Mar 2026) · accessed Oct 2026
- Nigeria Tax Administration Act 2025 (gazette copy) · accessed Oct 2026
- PwC Worldwide Tax Summaries: Nigeria individual tax administration (29 May 2026) · accessed Oct 2026
- TechCabal: How to file tax on the LIRS eTax portal (2 Apr 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.