The Traffic

"Big Tax Breaks Coming: FG to Offer 50% Tax Relief for Companies Boosting Worker Pay"

Yakubu Haruna Yakubu 

In a bold move to ease the financial burden on Nigeria’s workforce, the Federal Government is rolling out a new tax relief plan that offers businesses a 50% tax deduction if they increase salaries or provide transportation allowances to low-income workers. The initiative, part of a broader tax reform bill, is aimed at boosting wages for those earning N100,000 or less per month and encouraging companies to expand their workforce.

Tax Relief for Wage Increases and Transport Allowances

Under the new bill, 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,” companies that raise wages or provide transport subsidies for their lower-earning employees will qualify for significant tax relief. For expenses incurred between 2023 and 2024, firms will be able to deduct 50% of these costs from their taxable income, provided the workers’ gross monthly earnings do not exceed N100,000.

The bill makes it clear that salary increases for workers earning more than N100,000 will not be eligible for the deduction, focusing the relief strictly on low-income earners.

Incentives for Job Creation

Additionally, the government is incentivizing job creation. Companies that hire new employees, resulting in a net increase in their workforce during 2023 and 2024, will also qualify for the tax deduction. However, the new employees must remain on the payroll for at least three years, and they cannot be involuntarily dismissed during that period.

Economic Development Incentive Certificate

Beyond wage relief, the bill introduces an Economic Development Incentive Certificate to encourage firms to invest in capital projects. Companies seeking this tax incentive will apply through the Nigerian Investment Promotion Commission (NIPC) with a non-refundable application fee of 0.1% of their capital expenditure, capped at N5 million.

The NIPC will review applications and make recommendations to the Minister, who may then forward these to the President for approval.

A Game Changer for Nigerian Workers and Businesses

This initiative is seen as a win-win for both companies and workers, especially as inflation continues to rise, making daily living more expensive. Low-income workers stand to benefit directly from higher take-home pay, while companies receive tax breaks that can offset the cost of wage increases and new hires.

With Nigeria’s economy facing numerous challenges, this new tax plan could be a significant step toward alleviating the financial stress on households while encouraging businesses to invest in their workforce. As the bill progresses through the National Assembly, many are eagerly awaiting its final approval, hopeful that it will provide much-needed relief in a challenging economic climate.