The Federal Government is introducing a new legislative bill aimed at reforming Nigeria’s tax system, which includes a 50 per cent tax relief for companies that raise salaries or offer transportation allowances to low-income workers.
This initiative seeks to encourage businesses to invest in their employees, improve living standards, and foster economic growth.
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,” is dated October 4, 2024, and was obtained from the National Assembly, according to The Punch.
A review of the bill on Friday showed that it seeks to introduce income tax exemptions to promote salary adjustments.
One provision allows companies to claim an additional 50 per cent deduction in their relevant assessment years for costs incurred during the 2023 and 2024 calendar years.
Qualifying expenses for the tax deduction include wage increases and transportation subsidies or allowances provided to workers with gross monthly earnings of N100,000 or less.
However, the provision specifies that any salary increases for employees earning above N100,000 will not qualify for the deduction.
Additionally, companies that hire new employees and achieve a net increase in their workforce between 2023 and 2024 will also be eligible for the deduction, as long as the new hires remain employed for at least three years and are not involuntarily terminated.
A section of the bill read, “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 Federal Government is also planning to introduce an Economic Development Incentive Certificate as a tax incentive for companies investing in capital projects.
According to the bill, firms applying for the certificate must submit their applications to the Nigerian Investment Promotion Commission (NIPC), along with a non-refundable fee of 0.1 per cent of the capital expenditure, capped at N5 million.
The NIPC will review the applications and make recommendations to the Minister for approval, who may then forward these recommendations to the President.
