Nigeria Consolidated Relief ("CRA") 2021 calculations

SUGGESTED

Hi,

The recent changes in legislations states that CRA is calculated on gross income less all non taxable income which would included the allowable deductions such as life insurance, NHF & Pension amongst others.

If an employee wants his/her personal life insurance premium to be processed via the payroll, it would be added under the perks screen as it is not a deduction nor a company contribution. However, the system does not accommodate the change in legislation to then mark the life insurance as a GI deduction same as what has been changed on the deduction definition screen.  

How would we go about ensuring the CRA calculation is correct, without processing this as a deduction with an opposite negative entry to avoid an impact on nett pay?

  • 0
    SUGGESTED

    Good Day Vone

    Any value captured on the Perks Tax screen, can be flagged for Gross Income. Type PD ( Perks Definition) to activate the flag. Double click on the N under the Gross Inc column to change this to a Y.

    With specific regards to the Life Assurance, this value may be captured as a negative amount on the Perks tax screen. Negative amounts does not show on the lookup screens on the TAX screen, although the relevant total on the TAX screen is correct. This will be fixed in a future release. 

    Kind Regards

    Kavitha

  • 0 in reply to Kavitha

    Dear Kavitha

    I am aware they can all be marked as gross income. My question relates to marking it as a deduction for gross income to determine the correct CRA as per the recent changes in legislation.  Furthermore, the suggestion of adding it as a negative doesn't solve the issue of having the correct calculation of the CRA. The premium should lessen the gross income deduction prior to the calculation of CRA.

  • 0 in reply to Vone Jonker

    Good Day Vone

    Hope that you are well.

    Upon further investigate, I agree that the above will not work. Apologies for this.

    I have created an alternative, should you prefer to use this method. Please refer to the Knowledgebase article below:

    How can I add a private Life Assurance correctly on my Nigeria payroll, such that it appears as a Tax deductible as well as reduces the Gross Income?

    Please let me know if this works.

    Kind Regards 

    Kavitha

  • 0 in reply to Kavitha

    Dear Kavitha, I will have a look at the solution presented. Thank you.

    On another note not sure if you would be able to assist,  the excel Nigeria PAYE 2021 calculator issued by SAGE has a formula issue, upon investigation I found that line 17 which references relief for life insurance premiums isn't taken into account when calculating the gross income. If you add it into Line 15 deductions the gross income calculates correctly.

  • 0 in reply to Vone Jonker

    Good Day Vone

    May I please ask that you send us the exact calculator you are using with the calculation, as well as the Tax screen for an employee, as an example. Our support team will check and take this further. 

    Kindly email the query through to [email protected]

    Kind Regards

    Kavitha

  • 0 in reply to Kavitha

    Hi Kavitha, this is the PAYE calculator I am referring to.  I highlighted where the issue is, irrespective of if an amount is added under the Relief for life insurance premium, the gross income (GI) remains the same, which is incorrect. It should lessen the GI. Adding it in the above line "Deductions" accounts for it correctly.




    Nigeria PAYE Calculator 2021.xlsx

  • 0 in reply to Vone Jonker

    Good Day Vone

    Please rather use the attached calculator which was changed to accommodate the new definition for Gross income. 

    1. Definition of Gross Income

    Section 33(2) of PITA

    “ “gross income” means income from all sources less all non-taxable income, income on which no further tax is payable, tax-exempt items listed in paragraph (2) of the sixth schedule and all allowable business expenses and capital allowances.”

     Sixth Schedule (2)

    (2)  Tax Exempt: The following deductions are tax exempt—

    (a) National Housing Fund Contribution, (b) National Health Insurance Scheme (c) Life Assurance Premium (d) National Pension Scheme (e) Gratuities

     

    On the payroll, gross income is the basis for calculating the Consolidated Relief Allowance (CRA) and the 1% minimum tax. The new definition means that the gross income = taxable income less deductions specifically mentioned in paragraph 2 of the Sixth Schedule.

    8880.Nigeria PAYE Calculator 2021.xlsx

    Please let me know if this helps.

    Kind Regards

    Kavitha