FG Proposes 50% Tax Relief to Boost Salaries for Low-Income Workers
The Federal Government has announced a proposed legislative bill that offers a 50% tax relief for companies that increase salaries or provide transportation allowances to low-income workers. Dated October 4, 2024, the bill, 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 recently obtained from the National Assembly.
The primary goal of this initiative is to incentivize businesses to adjust wages in a meaningful way. A review of the bill indicates that companies will receive an additional 50% deduction on costs incurred during the 2023 and 2024 tax years. This relief specifically targets wage increases and transportation subsidies for employees earning gross monthly salaries of N100,000 or less.
However, the bill outlines that any salary increases for employees earning above N100,000 will not qualify for this deduction. Additionally, companies that expand their workforce by hiring new employees will also be eligible for the tax relief, provided these new hires remain with the company for at least three years without being involuntarily let go.
One section of the bill details, “A company shall be entitled to an additional deduction of 50% 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; provided that any additional award or salary increase to an employee earning above N100,000 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.”
In addition to the salary relief, the Federal Government is introducing an Economic Development Incentive Certificate aimed at encouraging investment in capital projects. To apply for this certificate, companies must submit their applications through the Nigerian Investment Promotion Commission (NIPC) along with a non-refundable fee of 0.1% of their capital expenditure, capped at N5 million. The NIPC will then review the applications and recommend them to the Minister for approval, who may subsequently forward the recommendations to the President.
