Pay-As-You-Earn (PAYE)

PAYE is a method of collecting tax at source from individuals in gainful employment. The employers will deduct tax according to the prevailing rates of tax from their employees’ salary or wages on each pay day for a month and then remit the tax to the Domestic Taxes Department via various commercial banks through the laid down procedure on or before the 15th day of the following month. The employee thus has no extra liability to pay at the end of the year unless he/she has income from other sources including the provision of other benefits-in-kind or other employment.

Calculation of Taxable Benefits in Kind of Employees

Section 23 (1) of the Income Tax Act 2000 taxes all fringe benefits as employment income. This includes the provision of a motor vehicle, housing, meals, chauffeur and domestic staff etc.


An employee of the National Revenue Authority is provided with a vehicle and driver for official use and also for travel from home to work as well as for other private purposes. He is also provided with a government house. He would be taxable on:

Motor vehicle: (Section 23(2) (a) and Para: 1 of the Ninth Schedule):

To ascertain the amount of the benefit we need to know:

1. The purchase cost of the vehicle

2. The running costs of that vehicle for the year

3. What proportion the employee’s non-business use of the vehicle bears to its total use in the


Driver: Section 23(2) (d)

To ascertain the amount of benefit, we need to know:

1. The amount of salary of the driver

2. The same information as in 3 above

House: Section 23(2) (b)

To ascertain the amount of  benefit, we need to know:

1. The market rent of the housing provided.

2. The amount of any payment made by the employee for the benefit.

Administration of the Law

Section 99( 2) of the ----requires all employers to make a return by 28 January of all employees and the full amount of their employment income (including cash income and all fringe benefits).

Tax Rate

Not over Le 500,000 per month:    Nil        

Next Le 500,000 per month:         15%

Next Le 500,000 per month:         20%

Next Le 500,000 per month:         30%

Above  Le 2 million per month:     35%

Due date for payments

Monthly: against 15th day of the month following the tax period.

Penalty for default

10% if paid within 30 days from the due date.

15% % if paid after 30 days but less than 90 days from the due date.

20% if paid after 90 days but less than 180 days after the due date.

25% if paid after 180 days from the due date.

Returns Filing

The employer is encouraged to file monthly PAYE Returns (Spreadsheets) on or before the 15th of the month following.

Legal provision reference

Section 152 (1) (2 a – d) of Income Tax Act ,2000 (as amended).

Part II of the First Schedule of Income Tax Act, 2000 (as amended). [LINK]