Federal Govt Offers 50% Tax Relief on Wage Hikes

Kehinde Fajobi

The Federal Government has introduced a 50 per cent tax relief in a new bill aimed at incentivising companies to increase wages or provide transport allowances to low-income workers.

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,” the proposed law, dated October 4, 2024, seeks to reshape Nigeria’s tax system.

A review of the bill revealed plans to offer income tax exemptions specifically aimed at encouraging companies to boost support for low-wage workers through salary adjustments and allowances.

A section of the bill states, “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: 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.”

Additionally, companies hiring new staff, resulting in a net workforce increase from 2023 to 2024, are also eligible for the deduction, provided the new employees remain employed for at least three years without being involuntarily dismissed. The bill states that these new hires must represent an increase over the company’s average net employment from the three prior years.

The bill also proposes an Economic Development Incentive Certificate for companies investing in capital projects. To qualify, companies must apply through the Nigerian Investment Promotion Commission (NIPC), accompanied by a non-refundable application fee of 0.1 per cent of the total project cost, capped at ₦5 million. Once reviewed by the NIPC, the application may be recommended to the Minister and forwarded to the President for final approval.

If enacted, the bill would introduce significant tax benefits for companies actively supporting lower-income employees and expanding their workforce, marking a strategic move towards both social and economic reform in Nigeria.