On January 9, 2025, a Federal High Court in Abuja ordered the Interior Minister and the Attorney General to defend the Expatriate Employment Levy (EEL). This levy, introduced on February 27, 2024, imposes significant fees on companies hiring foreign workers, aiming to promote local employment and skill transfer.
The EEL faced criticism for its potential economic impact and legal concerns upon its introduction. As the court reviews its legality, stakeholders are watching closely, hoping for a resolution that balances foreign investment with the protection of Nigerian labour interests.
Background
Nigeria’s Expatriate Employment Levy (EEL) was introduced on February 27, 2024. It requires employers to pay annual fees for expatriate workers.
Employers must pay $15,000 for directors and $10,000 for other expatriates. The levy aims to promote skill transfer and balance local employment needs.
The EEL applies to foreign workers in Nigeria for at least 183 days within a fiscal year, with exemptions for diplomatic staff and short-term workers.
As of March 8, 2024, the government temporarily suspended the EEL due to concerns from stakeholders. They worry about its impact on foreign investment.
The Incorporated Trustees of New Kosol Welfare Initiative filed a lawsuit against the Minister of Interior, Olubunmi Tunji-Ojo, and the Attorney General of the Federation, Lateef Fagbemi. They sought an injunction to stop the implementation of the Expatriate Employment Levy (EEL), arguing that it imposes unfair burdens on businesses.
Definition of Expatriate Workers
Expatriate workers, or ex-pats, are individuals assigned by their companies to work in a foreign country for a specific duration. They typically hold employment in their home country but operate abroad to leverage their skills and knowledge in different markets.
Key Provisions
- Applicability: The EEL applies to all employers hiring expatriate workers in Nigeria. It targets non-citizen employees working for 183 days or more annually.
- Levy Rates: Employers must pay $15,000 annually for expatriate directors. They pay $10,000 for other expatriate employees.
- Exemptions: The EEL does not apply to diplomatic staff, government officials, or individuals on the Nigeria Immigration Service exemption list.
- Compliance Deadline: Employers must comply with EEL regulations by April 15, 2024. They need to register and pay through an online portal.
- Record Keeping: Employers must maintain accurate records of expatriate employment. They should submit timely reports to the Nigeria Immigration Service.
- Penalties: Non-compliance can lead to penalties, including fines up to NGN 3,000,000 or imprisonment. Employers must adhere to all EEL requirements.
Read also: Navigating the Path: A Guide to Obtaining Work Permits in Nigeria
Offences against the EEL
1. Failure to File EEL: Employers must file their EEL payments within 30 days of hiring expatriate workers. If they fail to do this, they incur a fine of ₦3,000,000. Timely filing is crucial to avoid penalties and ensure compliance with regulations.
2. Failure to Register Employees: Employers must register each new expatriate employee within 30 days of their arrival in Nigeria. Failing to register these workers can also result in a fine of ₦3,000,000.
3. Submitting False Information: Employers must provide accurate information when filing for the EEL. Submitting forged or false information is a serious offense that carries a penalty of ₦3,000,000.
4. Failure to Renew EEL: Employers must renew their EEL payments before they expire each year. If they neglect this requirement, they face a fine of ₦3,000,000.
5. Inaccurate Reporting: Employers must submit accurate and complete reports regarding their expatriate workforce. Inaccurate or incomplete reporting can lead to severe penalties, including imprisonment for up to five years or a fine of ₦1,000,000.
6. Non-Compliance with Audits: Employers must comply with audits conducted by the Nigerian Immigration Service regarding their EEL payments and expatriate records. Non-compliance with these audits can result in additional fines or penalties.
Concerns and proposed impact
- Legal Concerns
Adewale-Smatt Oyerinde, Director-General of the Nigeria Employers’ Consultative Association (NECA), posit that the EEL lacks proper legislative backing, violating the principle of “no taxation without legislative consent.” He cited Section 59 of the Nigerian Constitution, which mandates that any tax imposition must be backed by an Act of the National Assembly.
- Economic Impact
The European Union (EU), represented by Massimo De Luca, expressed concerns that the EEL could deter foreign direct investment. They believe this could negatively impact Nigeria’s economic growth and job creation.
- Increased Costs
The Manufacturers Association of Nigeria (MAN) highlighted that the EEL increases employment costs significantly, with fees set at $15,000 for directors and $10,000 for other expatriates. They warn this could lead to higher prices for goods and services.
- Currency Concern
Adewale Ajayi, partner & head of the tax, regulatory and people services at KPMG expressed fear that this could exacerbate currency exchange challenges and inflation rates. He stated that “Payment of the EEL in US dollars will put unnecessary pressure on the exchange rate.”
Ajayi emphasized that if the government allowed payments in naira instead, it could alleviate some of these economic pressures.
- Redundancy of Regulations
Nigeria Employers’ Consultative Association (NECA), argued that existing laws already regulated expatriate employment.
Adewale-Smatt Oyerinde, NECA’s Director-General, stated that the Immigration Act and Local Content Act prioritized Nigerian workers.
He emphasized that a Handbook could not override clear provisions of existing laws in Nigeria.
Reactions
- The Lagos Chamber of Commerce and Industry (LCCI) acknowledged the Expatriate Employment Levy (EEL). They said it aims to address wage gaps between expatriates and Nigerian workers while encouraging skill transfer.
- Dele Kelvin Oye, president of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), welcomed the EEL. He praised the government’s commitment to creating a favourable environment for local and international investors.
- Bicci Alli, former Chairman, Oyo State Board of Internal Revenue emphasized that the EEL seeks to balance economic growth with social equity. He noted that it aims to protect local labor markets while promoting expatriate employment.
- The National Youth Council of Nigeria (NYCN) urged the federal government to implement the Expatriate Employment Levy (EEL), emphasizing its potential to create job opportunities for Nigerian youth and promote local talent development. They argued that the EEL could reduce reliance on expatriates and enhance the recruitment and training of local workers, addressing high youth unemployment rates while fostering economic growth.
