State PAYE in Nigeria: remitting to LIRS and other state tax authorities

One of the most misunderstood points in Nigerian payroll is where PAYE actually goes. Employers assume it's federal — it isn't. PAYE is a state tax, remitted to the State Internal Revenue Service of the state where each employee lives. Getting this right (and to the right state) is the difference between clean compliance and a demand notice. Here's how state PAYE works.

State PAYE at a glance

Sources: Personal Income Tax Act (as amended); Lagos State Internal Revenue Service; respective State IRS regulations.

1. Why PAYE is a state tax

Personal income tax in Nigeria — including PAYE on employment income — is collected by the states under the Personal Income Tax Act. Each State Internal Revenue Service administers PAYE for the individuals resident in that state. The federal Nigeria Revenue Service (formerly FIRS) handles company taxes like Company Income Tax and VAT, but employee PAYE belongs to the states.

The practical rule: an employee's PAYE goes to the state where that employee resides, which for most employees is where they live and work.

2. The monthly remittance

Each month you deduct PAYE from employees and remit it to the relevant State IRS. The common deadline is the 10th of the following month — so April's PAYE is due by 10 May. Most states operate an e-filing portal (LIRS's portal for Lagos, and equivalents elsewhere) where you upload the schedule and pay.

Remit on time: late remittance attracts interest and penalties, and states have become far more active in enforcing PAYE collection, including through tax audits and demand notices.

3. The annual employer return

Beyond the monthly remittances, employers file an annual PAYE return with the State IRS — a reconciliation of the prior year's payroll and PAYE for all employees — commonly due by 31 January. This return (often called the employer's annual return / Form H1) ties your twelve monthly remittances to the full-year position. File it on time; a missed annual return is a frequent trigger for a state PAYE audit.

4. A multi-state or remote workforce

Remote and distributed teams complicate PAYE, because it follows the employee's state:

• An employee living and working in Lagos → PAYE to LIRS.
• An employee living in Rivers → PAYE to the Rivers State IRS.
• A fully remote employee → PAYE generally to their state of residence.

If your team spans several states, you register as an employer in each relevant state and split your remittances accordingly. This is administratively heavier than a single-state payroll, so keep a clear record of each employee's state and remit to the correct authority — remitting everyone's PAYE to one convenient state is a common error that leaves you exposed in the states you underpaid.

5. Penalties for getting it wrong

Two failure modes carry cost:

• Late or short remittance — interest and penalties on the unpaid PAYE, recoverable by the State IRS.
• Remitting to the wrong state — you can end up having "paid" but still owing the correct state, since the right authority never received its due.

Both are avoidable with accurate per-employee state tracking and disciplined monthly remittance.

AnooreHR computes each employee's PAYE and organises remittances by state, producing the schedule each State IRS expects and flagging the monthly and annual deadlines — so a multi-state Nigerian workforce stays compliant without a spreadsheet per state. Book a demo or sign up free to see state-aware PAYE in action.

Frequently asked questions

Related: How to register as an employer for PAYE in Nigeria · How to compute PAYE in Nigeria · See pricing