KEY POINTS
- Firms increasing low income wages can get 50% tax deduction.
- The relief, however, is only applicable for workers whose monthly earnings do not exceed N100,000.
- Firms hiring new employees who stay on for over 3 years get tax benefits.
Companies that raise the salaries or give transport allowances to people earning N100,000 or less a month get a 50% tax relief from the Nigerian government under the new tax reform bill that is to be introduced.
The proposed ‘Nigeria Tax Act’ floats this new incentive to make working less of a financial burden on these lower income workers while at the same time enticing companies to increase their workforce.
Incentives targeted at low income workers
Tax deductions are offered to companies that increase wages, or offer transport subsidies, including those with workers earning less than N100,000 gross per month.
Wage increase or allowance expenses incurred in the 2023 and 2024 tax years are 50% tax deductible. However, if companies increase wages for employees earning more than that threshold, they will not be able to claim the deduction, guaranteeing the benefit is aimed at poorer groups.
To further support economic growth, the government has decided to help economic support through an Economic Development Incentive Certificate for companies investing in capital projects on tax benefits. To be eligible for this certificate, firms are required to apply through the Nigerian Investment Promotion Commission (NIPC) with a non refundable fee capped at N5 million.
Expanded workforce companies’ new deductions
It offers deductions to companies that increase their workforce in 2023 and 2024, so long as those new employees work for the company for at least three years. This move is to encourage stable growth in employment and the overall economy.
The bill also states that any firm that meets these criteria is entitled to another 50 percent deduction which is line with Nigeria’s broader goals for economic stability and job creation.
According to The Punch, the legislation is a significant departure in favor of low income workers and urging private sector investment in economic expansion, as the government vows to stimulate economic resilience and lower unemployment.
