How is tax deducted from an employee's earnings?


An Employee Declaration Form (TD Form) AU-1 must be filed with Inland Revenue Department within fourteen days (14) after the commencement of employment. The employer will use the tax deduction tables prepared by the Department, to determine how much tax should be deducted at each pay period based on the employee's Tax Code.

An employee feels that too much PAYE is being deducted from his salary, can he arrange with his employer to payless?

No. If the employee has a Code Number and the amount to be deducted is in accordance with the Tax Tables, the employer has no authority to enter into any arrangement with the employee for a lower deduction.

If any employer deducts more tax than should be paid by the employee at any pay period, can be regularise this by deducting less from the employee at the next pay period?

No. The employer has no authority to deduct less PAYE from the emolument of an employee, even if asked to do so by the employee. The employer must deduct the amount arrived at by using the information on the Code Form and the Tax Deduction Tables. Should the employer deduct less tax he shall be liable to a penalty which will be inclusive of interest.

An overpayment of PAYE by an employee would be refunded when the Income Tax Return for that income year is filed and processed.