FG proposes 50% tax relief to help firms increase salaries

• Published On: 27 October 2024 at 18:46

The Federal Government is introducing a new legislative bill to reform Nigeria's tax system, which includes a 50% tax break for businesses that raise wages or provide transport allowances to low-income workers.

This initiative aims to encourage employers to invest in their employees, raise living standards, and promote 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," was obtained from the National Assembly on October 4, 2024, according to The Punch.

A review of the bill on Friday revealed that it seeks to implement income tax breaks to encourage salary adjustments.

One provision allows businesses to claim an additional 50% deduction in their relevant assessment years for costs incurred during the calendar years 2023 and 2024.

Wage increases and transport subsidies or allowances provided to workers earning N100,000 or less per month qualify as tax deductions.

However, the provision states that any salary increases for employees earning more than N100,000 are not eligible for the deduction.

Furthermore, companies that hire new employees and achieve a net increase in their workforce between 2023 and 2024 will 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% in the relevant years of assessment in respect of costs incurred in the 2023 and 2024 calendar years on the following—

"(a) wage awards, salary increases, transportation allowances, or transportation subsidies granted to a low-income worker, which bring the worker's gross monthly remuneration up to an amount not exceeding N100,000.00; provided that any additional award or salary increase to an employee earning more than 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 also intends to introduce an Economic Development Incentive Certificate as a tax break for businesses 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% of the capital expenditure, up to N5 million.

The NIPC will review the applications and make recommendations to the Minister for approval, which may then be forwarded to the President.