Employees Tax - Pay As You Earn (PAYE) System

The Pay As You Earn (PAYE) system is a method of paying Income Tax on remuneration. The employer deducts tax from your salaries or pension earnings before paying you the net salary or pension.

This article is intended to provide you with a simple and logical introduction to some basic principles of Income Tax as it applies to employees.

The Income Tax Act [Chapter 23:06] specifies what elements of an employee’s remuneration or earnings are subject to tax and at what rate of tax. It also deals with what income is exempt from tax and what deductions are allowed from these earnings, prior to tax being calculated.

Assume then for a moment that everything you earn - be it in cash, benefits, or an item of value you are given instead of cash - is subject to some form of tax. However, the determination of the value and its associated tax liability in respect of any of these forms of payments will differ in some cases.

The official tax table operates on an escalating scale basis, (i.e. the higher your earnings, the greater percentage tax you pay on each bracket of earnings). When your earnings reach a certain amount, the percentage stops increasing and a flat rate of tax becomes applicable for any earnings above this level - that is Marginal Tax Rate (MTR).

  • The tax-free threshold for individual taxpayers has been raised from US$250.00 to US$300.00 with effect from 1st January 2015.
  • The rate of tax for individual taxpayers who earns remuneration of above US$20 001.00 per month  was  increased to 50%  with effect from  1 January 2014
  • The due date for the submission of PAYE returns and payment is the 10th of the following month.



PAYE is calculated as follows:

  1. Determine gross income for the day/week/month/year.
  2. Deduct exempt income, for instance bonus:

    You get => Income

3. Deduct allowable deductions, e.g. pension:

You get => Taxable Income

Please refer to tax tables.



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