The Federal Government of Nigeria has proposed a 50% tax relief to incentivize companies that increase salaries or provide transportation allowances for their low-income workers.
This measure is part of a legislative bill aimed at reforming Nigeria’s tax system, 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.” Dated October 4, 2024, this bill seeks to provide financial relief to firms committed to raising wages and easing the burden of transport costs on workers earning N100,000 or less per month.
Under this proposed law, companies will qualify for a 50% tax deduction on specific costs incurred in the 2023 and 2024 calendar years. These qualifying costs include wage increases, transportation subsidies, and other allowances that raise the total monthly pay for eligible employees to a maximum of N100,000. However, salary increments for employees earning more than this threshold will not be eligible for the tax benefit, ensuring that the relief targets lower-income earners specifically.
Additionally, companies that expand their workforce by hiring new employees during the 2023-2024 period will also qualify for the tax relief. This provision aims to encourage job creation by offering the deduction to firms that achieve a net increase in their workforce, provided the new employees are retained for a minimum of three years and are not laid off involuntarily.
The bill also introduces an Economic Development Incentive Certificate as a new tax incentive, targeting companies investing in capital projects. Firms that apply for this certificate will need to submit an application through the Nigerian Investment Promotion Commission (NIPC), accompanied by a non-refundable fee set at 0.1% of the capital expenditure, up to a maximum of N5 million. The NIPC will review the applications and make recommendations to the Minister, who may then present them to the President for approval.
This strategic policy underscores the Federal Government’s commitment to driving economic growth and easing the tax burden on companies that prioritize employee welfare and job creation. Through these reforms, the government hopes to create a more favorable environment for businesses, supporting both employment stability and economic resilience in Nigeria.
