The Federal Government is offering a 50 percent tax relief to companies that raise salaries or provide transportation allowances to low-income workers, under a new legislative bill aimed at reforming Nigeria’s tax system.
The proposed law, titled “A Bill for an Act to Repeal Certain Acts on Taxation and Consolidate the Legal Frameworks relating to Taxation and Enact the Nigeria Tax Act to Provide for Taxation of Income, Transactions, and Instruments, and Related Matters,” is dated October 4, 2024, and was obtained from the National Assembly.
The bill reviewed on Friday proposes targeted income tax exemptions to encourage companies to adjust salaries. Under the bill, companies can claim an additional 50 percent deduction on eligible expenses in the 2023 and 2024 assessment years, specifically for wage increases, transportation subsidies, or allowances provided to workers with gross monthly earnings capped at N100,000.
Notably, salary increments for employees earning over N100,000 monthly will not qualify for this tax benefit. Additionally, companies that expand their workforce with a net increase in hires during 2023 and 2024 are eligible for the deduction if the new employees stay employed for at least three years without involuntary termination.
A section of the bill reads, “A company shall be entitled to an additional deduction of 50 percent in the relevant years of assessment in respect of costs incurred in 2023 and 2024 calendar years on the following –
“(a) wage awards, salary increases, transportation allowance or transport subsidy granted to a low-income worker, which bring the gross monthly remuneration of the worker up to an amount not exceeding N100,000.00; provided that any additional award or salary increase to an employee earning above N100,000.00 as monthly salary shall not qualify for the additional deduction under this subsection; and
“(b) salaries of any new employee constituting a net increase in the average number of new employees hired in 2023 and 2024 calendar years over and above the average net employment in the 3 preceding years, provided that such new employees are not involuntarily disengaged within a period of 3 years post-employment.”
Also, the Federal Government plans to introduce an Economic Development Incentive Certificate as a tax incentive for companies investing in capital projects.
As outlined in the bill, firms seeking the certificate must submit their applications through the Nigerian Investment Promotion Commission, accompanied by a non-refundable fee of 0.1 percent of the capital expenditure, capped at N5m.
The NIPC will review and recommend the applications to the Minister for approval, after which the Minister may forward the recommendation to the President.
