In a bid to alleviate financial pressures on low-income workers and stimulate economic growth, the Federal Government has introduced a legislative bill proposing a 50% tax relief for companies that raise salaries or offer transport allowances.
This legislative move is part of broader tax reforms intended to benefit both employers and employees, according to a recent report obtained from PUNCH.
Dated October 4, 2024, 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 aimed at encouraging wage improvements by providing key tax incentives to qualifying firms.
How It Works
A close look at the bill, reviewed on Friday, highlights plans to introduce special income tax exemptions.
Companies that increase wages or offer transport subsidies to employees earning up to N100,000 per month will be eligible for an additional 50% tax deduction.
The measure is designed to ease the burden on lower-income employees and motivate companies to invest in workforce support.
Notably, however, the provision excludes salary increments for employees whose monthly earnings surpass N100,000.
This aligns with the government’s strategy to directly support low-income workers.
In a significant move to spur employment, the bill also includes incentives for companies that expand their workforce in 2023 and 2024.
According to the proposed legislation, firms will be eligible for tax deductions on salaries of newly hired staff if those additions result in a net increase in overall headcount.
For companies to qualify, new employees must be retained for a minimum of three years without involuntary dismissal.
Economic Development Incentive Certificate
In a further attempt to drive sustainable growth, the government is introducing an Economic Development Incentive Certificate as a tax incentive for companies making capital investments.
To obtain this certificate, companies are required to apply through the Nigerian Investment Promotion Commission (NIPC) and pay a non-refundable fee of 0.1% of their capital expenditure, capped at N5 million.
The NIPC will assess each application, which will then be reviewed by the Minister before potential forwarding to the President for final approval.
This certificate could provide a substantial boost for companies investing in infrastructure, technological upgrades, or other developmental projects that align with the national economic agenda.
The proposed legislation marks a strategic shift in the Federal Government’s approach to economic reform, placing emphasis on supporting workers and employers to drive growth.
