FG plans 50% relief to help firms increase salaries

The Federal Government is set to implement a 50% tax relief for businesses that raise salaries or provide transportation allowances to low-income employees, as part of a new legislative initiative aimed at overhauling Nigeria’s tax framework. 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 dated October 4, 2024, and has been sourced from the National Assembly.

A review of the bill on Friday revealed its intention to introduce specific income tax exemptions to encourage salary increases. According to the bill, companies will be eligible for an additional 50% deduction in their tax assessments for expenses incurred during the 2023 and 2024 calendar years.

Eligible costs include wage hikes and transportation benefits for employees whose gross monthly earnings do not exceed N100,000. However, the bill specifies that any salary increases for those earning above N100,000 will not qualify for the tax relief.

Additionally, companies that expand their workforce by hiring new employees between 2023 and 2024 can also benefit from this deduction, provided these new hires remain employed for a minimum of three years and are not laid off involuntarily.

One section of the bill states, “A company shall be entitled to an additional deduction of 50% in the relevant years of assessment for costs incurred in 2023 and 2024 concerning the following –

(a) wage increases, transportation allowances, or subsidies provided to low-income workers whose gross monthly pay does not exceed N100,000; provided that any additional increases for employees earning over N100,000 shall not qualify for this deduction; and

(b) salaries of new employees that contribute to a net increase in the workforce during the 2023 and 2024 calendar years, above the average net employment over the preceding three years, given that these new hires are not involuntarily let go within three years of employment.”

Furthermore, the Federal Government plans to introduce an Economic Development Incentive Certificate as a tax benefit for companies investing in capital projects. As stipulated in the bill, businesses wishing to obtain this certificate must submit applications through the Nigerian Investment Promotion Commission (NIPC), along with a non-refundable fee of 0.1% of the capital expenditure, capped at N5 million. The NIPC will evaluate and recommend the applications for approval by the Minister, who may then forward the recommendations to the President.