The Federal Government has introduced a bill offering a 50% tax relief to companies that boost salaries or provide transport allowances to low-income employees. Part of a broader reform package, this initiative aims to ease financial burdens on workers and encourage business investment in employee compensation.
The proposed legislation, 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 presented to the National Assembly on October 4, 2024.
Under the bill, companies will be eligible for an additional 50% deduction on costs related to salary increases or transport subsidies incurred in 2023 and 2024. These incentives apply to low-income workers whose gross monthly pay is adjusted up to N100,000 or less. However, salary increases for employees earning above N100,000 per month will not qualify.
Further incentives are available for companies expanding their workforce. Firms hiring new employees, resulting in a net workforce increase in 2023 or 2024, can claim the tax deduction if these hires remain employed for at least three years and are not involuntarily disengaged.
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… wage awards, salary increases, transportation allowance or transport subsidy granted to a low-income worker… provided that any additional award or salary increase to an employee earning above N100,000.00… shall not qualify for the additional deduction….”
Additionally, the Federal Government plans to launch an Economic Development Incentive Certificate, a tax incentive for companies investing in capital projects. Applications for this certificate, to be submitted through the Nigerian Investment Promotion Commission (NIPC), require a non-refundable fee of 0.1% of the project’s capital cost, capped at N5 million. The NIPC will review applications and forward qualified candidates to the Minister, who may present them to the President for approval.
