Solidarity levy explained
Solidarity Levy is payable by any individual whose leviable income exceed 3 million in a fiscal year. Leviable income is defined as chargeable income received by an individual including any dividend.
The leviable income does not include any lump sum by way of commutation of pension or by way of death gratuity or as consolidated compensation for death or injury, and paid –
- by virtue of any enactment;
- from a superannuation fund; and
- under a personal pension scheme approved by the Director-General
Employers are required to withhold PAYE on SL on the cumulative chargeable income of their employees when it exceed the cumulative Solidarity Levy Exemption Threshold (SLET).
- Cumulative Chargeable Income is the Cumulative Emoluments less Cumulative monthly income exemption threshold (including any other exemptions and relief).
- SLET is the aforementioned 3 million. Cumulative SLET is calculated by dividing 3,000,000 by 13 and multiplying the result by the number of months applicable.
NB: For this thread, we will assume that the current fiscal period is November (5th Fiscal Period)
Cumulative SLET= 3,000,000/13 x 5= 1,153,486
The rate for PAYE on Solidarity Levy equal to either
- 25% of the cumulative excess (Cumulative Chargeable Income – Cumulative SLET); or
- 10% of the cumulative emolument.
Taking employee Dodo as example:
a. His IET is 325,000; as the month of November his cumulative IET = 125,000
b. His current month’s emolument is 380,000
c. His cumulative emoluments is 2,450,000
d. His cumulative chargeable income is 2,325,000
e. Total Solidarity Levy on PAYE already paid in the previous months is 207,000
𝐴=25% 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑒𝑥𝑐𝑒𝑠𝑠=25% 𝑜𝑓 1,171,154=292,788
𝐵=10% 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑒𝑚𝑜𝑙𝑢𝑚𝑒𝑛𝑡𝑠=10% 𝑜𝑓 2,450,000=245,000
At this point we need to evaluate which of A or B is less. In our case, B is less. The cumulative PAYE on SL as at the month of November for Dodo is 245,000.
The Solidarity Levy to be withheld for Dodo for the month of November is 245,000 less the total past PAYE on SL withheld.
𝐶= 𝑃𝐴𝑌𝐸 𝑜𝑛 𝑆𝐿 𝑓𝑜𝑟 𝑡ℎ𝑒 𝑚𝑜𝑛𝑡ℎ 𝑜𝑓 𝑁𝑜𝑣𝑒𝑚𝑏𝑒𝑟=245,000−207,000=38,000
However, the PAYE on SL for a month cannot exceed 15% of the current month’s emolument.
𝐷=15% 𝑜𝑓 𝑡ℎ𝑒 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑚𝑜𝑛𝑡ℎ′𝑠 𝑒𝑚𝑜𝑙𝑢𝑚𝑒𝑛𝑡=15% 𝑜𝑓 380,000= 57,000
In this case, C is less than D, hence the final PAYE on SL for the month of November for Dodo is 38,000. In the event that D was less than C, D would be the PAYE on SL for the month.
The calculation of SL is different where an employee is not submitting EDF to his employer. If his emolument for the month exceed one thirteenth of the SLET (3,000,000 / 13), the PAYE on SL is calculated at 25% of the excess. The maximum deduction is limited to 10% of his current month’s emoluments in that case as well.