Nigeria’s Government is proposing a 50% tax break for businesses that raise wages or provide low-income workers with transportation allowances. 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,” aims to encourage compensation modifications by introducing specific income tax exemptions.
The bill also includes provisions for tax incentives for businesses that invest in infrastructure development in low-income areas. This comprehensive approach to taxation reform is intended to stimulate economic growth and reduce income inequality in Nigeria.
The law allows businesses to deduct an extra 50% of expenses spent in the calendar years 2023 and 2024 in their applicable years of assessment. Qualified expenses include wage hikes, transportation subsidies, or allowances given to employees whose gross monthly earnings are N100,000 or less. However, further pay increases given to workers making more than N100,000 per month will not qualify for the tax exemption.
Companies that hire new workers that result in a net increase in their workforce between 2023 and 2024 will be eligible for the deduction, as long as the new hires stay on the job for at least three years and do not leave for no reason.
The Federal Government also plans to introduce an Economic Development Incentive Certificate as a tax incentive for companies investing in capital projects. Firms seeking the certificate must submit their applications through the Nigerian Investment Promotion Commission, accompanied by a non-refundable fee of 0.1% of the capital expenditure, capped at N5m. The NIPC will review and recommend applications to the Minister for approval, after which the Minister may forward the recommendation to the President.
