Home News FG Proposes 50% Tax Relief for Companies Raising Salaries of Low-Income Workers.

FG Proposes 50% Tax Relief for Companies Raising Salaries of Low-Income Workers.

by hannah
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The Federal Government has introduced a proposal for a 50% tax relief targeted at companies that increase salaries or provide transport allowances to low-income workers.

This move is part of a new legislative bill aimed at overhauling 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, was dated October 4, 2024, and has been obtained from the National Assembly.

It aims to introduce income tax exemptions to incentivize wage increases.

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According to a section of the bill, companies will be entitled to an additional 50% deduction in their relevant assessment years for costs incurred during the 2023 and 2024 calendar years.

These qualifying expenses include wage increases, transportation subsidies, or transport allowances provided to workers earning up to N100,000 in gross monthly income.

However, the bill specifies that additional salary increases granted to employees earning above N100,000 per month will not qualify for the deduction.

Firms that hire new employees, resulting in a net increase in their workforce during 2023 and 2024, will also be eligible for the deduction, provided that these new employees remain with the company for at least three years without involuntary disengagement.

A section of the bill states, “A company shall be entitled to an additional deduction of 50 per cent 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.”

The bill, however introduces the concept of an Economic Development Incentive Certificate as a tax incentive for companies investing in capital projects.

Under the bill, firms must submit applications through the Nigerian Investment Promotion Commission (NIPC) with a non-refundable fee of 0.1% of their capital expenditure, capped at N5 million.

The NIPC will review the applications and recommend them to the Minister for approval, who may then forward them to the President for final consideration.

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