FIRS vs State IRS: Where and How to Remit PAYE in Nigeria Based on Employee Residency

Updated for the Nigeria Tax Act 2025 and current state IRS remittance procedures

One of the most common payroll mistakes in Nigeria has nothing to do with how much tax is being deducted. It is about where that tax is being sent. A company can calculate PAYE perfectly, deduct the right amount from every employee, and still end up in serious trouble because the money went to the wrong tax authority.

The confusion usually comes down to a simple misunderstanding. Many employers assume that because their business is registered in Lagos, or because their head office is in Abuja, that is where all PAYE should be remitted. That is not how the law works. The rule is based on employee residency, not company location. And with the Nigeria Tax Act 2025 now in full effect, getting this wrong is more expensive than ever.

This guide breaks down the dual tax system, explains the residency rule in plain terms, and shows you exactly where and how to remit PAYE for your employees, whether they live in Lagos, Edo, Abuja, or anywhere else in the country.

Why FIRS and State IRS Both Exist

Nigeria operates what is called a dual tax system. The federal government and state governments have separate taxing powers, and they are administered by different agencies.

The Federal Inland Revenue Service, or FIRS, handles federal taxes. That includes Company Income Tax, Value Added Tax, Petroleum Profits Tax, and Capital Gains Tax for companies. FIRS also collects Personal Income Tax from a specific group of individuals: non-residents who earn income from Nigeria, members of the Nigerian Armed Forces, the Nigerian Police Force (excluding civilian staff), and the Nigerian Foreign Service. Residents of the Federal Capital Territory, Abuja, remit their personal income tax to the FCT Internal Revenue Service, not to FIRS.

State Internal Revenue Services, often called SIRS, handle Personal Income Tax for individuals and unincorporated businesses. Each state has its own agency. In Lagos, it is the Lagos State Internal Revenue Service, or LIRS. In Edo State, it is the Edo State Internal Revenue Service, or eIRS. In Rivers State, it is the Rivers State Internal Revenue Service, and so on.

The dividing line is straightforward. If you are running a registered company, that company pays Company Income Tax and VAT to FIRS. But the PAYE you deduct from your employees' salaries goes to the state where each employee is resident. These are not duplicate taxes. They apply to different entities and different income sources.

The Residency Rule: The Key to Getting It Right

The residency rule is the foundation of PAYE remittance in Nigeria. It states that an employee's PAYE must be remitted to the State Internal Revenue Service of the state where the employee is resident during the relevant year of assessment.

Residence, in this context, means the employee's permanent place of residence. It is not where the company's office is located. It is not where the employee was hired. It is where the employee actually lives.

If an employee lives in Lagos but works in Ogun State, their PAYE goes to LIRS, not the Ogun State Internal Revenue Service. If an employee lives in Ogun but works in Lagos, their PAYE goes to the Ogun State Internal Revenue Service. The employer's location is irrelevant for this purpose.

When an employee changes residence during the assessment year, the rule becomes slightly more nuanced. If they spend 183 days or more in a new state within a 12-month period, their PAYE should be remitted to the SIRS of the new state. In practice, this is often handled by splitting the year's remittances between the two states, but the 183-day threshold is the standard reference point.

A Practical Example

Imagine a company called XYZ Ltd, headquartered in Victoria Island, Lagos. The company has three employees:

• Amaka lives in Ikeja, Lagos. Her PAYE goes to LIRS.
• Bola lives in Ota, Ogun State. Her PAYE goes to the Ogun State Internal Revenue Service, even though she reports to the Lagos office every day.
• Chidi lives in Benin City, Edo State. He works remotely for XYZ Ltd. His PAYE goes to the Edo State Internal Revenue Service (eIRS).

XYZ Ltd must register with LIRS, the Ogun State IRS, and eIRS, and file monthly returns with all three. If the company only remits to LIRS because that is where its office is, Amaka is covered, but Bola and Chidi are not. Their taxes are being sent to the wrong place.

Where to Remit: A State by State Breakdown

Each state has its own Internal Revenue Service, its own portal, and its own remittance channels. Here is a quick reference for some of the major ones.

Lagos State (LIRS)

Lagos uses the eTax portal, accessible at etax.lirs.net. Employers must register on the portal, upload monthly PAYE schedules, and make payments through the integrated payment options. The portal supports debit card payments and bank transfers. The monthly remittance schedule must include each employee's name, staff ID, payer ID, gross monthly salary, tax deductible, and tax remitted.

Edo State (eIRS)

Edo State uses the EIRS Self-Filing Portal at paye.eirs.gov.ng. Employers upload completed annual tax returns and monthly remittance schedules through this portal. Payment can be made through designated banks, online via the EIRS website, through Remita, or via Interswitch Paydirect. The eIRS has been particularly vocal about moving employers away from paper filing and onto the digital platform.

Federal Capital Territory, Abuja (FCT-IRS)

Abuja residents remit PAYE to the FCT Internal Revenue Service, not to FIRS. The FCT-IRS accepts payments through Remita, Quickteller, Paydirect, and direct payments at designated banks including Access Bank, Zenith Bank, First Bank, and UBA. Employers must submit a monthly PAYE return detailing employee names, TIN, gross pay, reliefs, and tax paid.

Other States

Every state has its own system, but the core requirements are the same. You register as an employer, file monthly returns, and remit the deducted tax. Some states use Remita, some use their own portals, and some still accept bank branch payments. The key is to check the specific requirements of each state where your employees reside.

If you have employees in multiple states, you must register with each state's IRS and file separate monthly returns. There is no single federal portal that handles PAYE remittance for all states.

How to Remit PAYE: The Step by Step Process

The exact steps vary slightly by state, but the general process looks like this.

1. Register with the relevant state IRS. You need a taxpayer ID for the company. In some states, this can be done online. In others, you may need to visit a tax office.
2. Maintain accurate employee records. For each employee, you need their full name, Tax Identification Number (TIN or Payer ID), state of residence, gross salary, and the tax deducted. This information goes into your monthly remittance schedule.
3. Calculate PAYE correctly. Use the current tax bands and applicable deductions. Errors in calculation lead to errors in remittance, which can trigger penalties.
4. File your monthly return. Most states require this through an online portal. You upload a schedule showing every employee and the tax remitted on their behalf.
5. Make the payment. Pay the total amount through the state's designated payment channels. Always keep the receipt or electronic confirmation.
6. File annual returns. At the end of the year, you must file annual PAYE returns for all employees. In Edo State, for example, Form H1 covers the preceding year and is due by 31 January. Form H3 covers the current year and is due by 31 March.

The Deadline You Cannot Afford to Miss

PAYE remittance is due by the 10th day of the month following the month in which salaries were paid. If you pay January salaries on 28 January, the PAYE for those salaries must be remitted by 10 February.

This deadline applies across the country. Lagos, Edo, Abuja, and every other state IRS operates on the same 10th of the month deadline. Some states may grant extensions for annual returns, but the monthly remittance deadline is not negotiable.

Common Mistakes Employers Make

• Remitting to the wrong state. This is the most common error. Employers often assume their head office location determines the remittance state. It does not. Employee residence is what matters.
• Not updating employee records. When an employee moves to a new state, their PAYE remittance should change. If payroll is not updated, the tax continues going to the old state.
• Missing the 10th of the month deadline. Late remittance triggers penalties and interest. Build a payroll calendar and stick to it.
• Filing incomplete schedules. States like Lagos and Edo require detailed monthly schedules. Missing TINs, incorrect names, or incomplete salary breakdowns can cause your filing to be rejected.

For a closer look at how to calculate the correct PAYE amount before remitting, see our guide on how to calculate PAYE in Nigeria with the latest FIRS tax brackets.

What Happens If You Get It Wrong

Remitting PAYE to the wrong state is not a minor administrative slip. It is a compliance failure, and tax authorities are becoming much better at detecting it.

If an employee needs a Tax Clearance Certificate from their state of residence and discovers that their PAYE has been going to a different state, they cannot get the certificate. They will have to request that the tax be transferred, which is a slow and frustrating process. In some cases, the money may need to be refunded from one state and re-remitted to another.

For the employer, the consequences include penalties, interest, and the possibility of an audit. Under the NTAA 2025, penalties for non-compliance start at ₦100,000 for the first month and ₦50,000 for each subsequent month for failure to file returns. For failure to deduct, the penalty is 40 percent of the un-deducted amount.

The reforms have also made it easier for tax authorities to cross-check payroll data. Digital filing systems mean that discrepancies between employee residency records and remittance patterns are more visible than they used to be.

Getting It Right from the Start

The residency rule is not complicated, but it does require attention to detail. Every time you onboard a new employee, you need to know where they live. Every time an employee moves, you need to update their records. And every month, you need to remit to the correct state IRS by the 10th.

If your payroll is still set up to send all PAYE to a single state, it is worth reviewing. With the new penalty regime in place, the cost of getting it wrong is simply too high.

This article is for general information only and does not constitute tax advice. Tax rules and state procedures can change. For advice specific to your situation, consult a qualified tax professional or contact the relevant state Internal Revenue Service directly.