Nigeria’s Investment Tax Incentives

[vc_row type=”vc_default” full_width=”stretch_row_content_no_spaces” css=”.vc_custom_1500547593342{padding-right: 100px !important;}” el_class=”noPaddinRow”][vc_column width=”1/6″ el_class=”noPaddingLeft” offset=”vc_hidden-md vc_hidden-sm vc_hidden-xs”][vc_raw_html]JTNDZGl2JTIwY2xhc3MlM0QlMjJtYWluLXN0cmlwJTIyJTNFJTBBJTNDZGl2JTIwY2xhc3MlM0QlMjJibHVlLXN0cmlwMCUyMiUzRSUzQyUyRmRpdiUzRSUwQSUzQ2RpdiUyMGNsYXNzJTNEJTIyYmx1ZS1zdHJpcDElMjIlM0UlM0MlMkZkaXYlM0UlMEElM0NkaXYlMjBjbGFzcyUzRCUyMmJsdWUtc3RyaXAyJTIyJTNFJTNDJTJGZGl2JTNFJTBBJTNDJTJGZGl2JTNF[/vc_raw_html][/vc_column][vc_column width=”5/6″ el_class=”justifyText” css=”.vc_custom_1530480782114{padding-right: 310px !important;}” offset=”vc_hidden-md vc_hidden-sm vc_hidden-xs”][vc_empty_space height=”50px”][vc_row_inner el_id=”newsletters”][vc_column_inner width=”1/6″][/vc_column_inner][vc_column_inner width=”2/3″][vc_custom_heading text=”Nigeria’s Investment Tax Incentives” font_container=”tag:h1|font_size:22|text_align:justify|color:%236699cc|line_height:1.8″ use_theme_fonts=”yes”][/vc_column_inner][vc_column_inner width=”1/6″][/vc_column_inner][/vc_row_inner][vc_empty_space height=”25px”][vc_column_text]Adam Smith in his book, Wealth of Nations (1776) propounded the Equity, Certainty, Economical and Convenience theory of taxation. Though these pillars of taxation still reign supreme, other ancillary motives have been woven into the fabric of the global tax structure.

The modern tax philosophy is that a tax regime should not discourage the creation of wealth but should act as an incentive for investment. Nigeria is not left out in the quest to create a tax structure that encourages investment. Below are some sectors of the economy where the Federal Government has taken fiscal measures to shore up investment in the country.

Export Promotion and Manufacturing.

The Federal Government of Nigeria encourages the exportation of “Made-in-Nigeria” goods to stimulate growth in the non-oil sector. The following tax incentives are discernable under this head:

Companies engaged in exportation and manufacturing are entitled to unrestricted Capital Allowances.
Any industry set up in an Export Processing Zone (EPZ) with the intention of exporting goods manufactured there will be exempted from tax.
Plant and machinery imported for use in an EPZ are exempted from Value Added Tax (VAT).
Dividends paid by wholly export-oriented companies are exempted from tax.
Interest earned by banks on loans granted by them for export businesses are exempted from tax.

Tourism and Hotel Related Services.

The Nigerian Government as part of its efforts to boost the tourism potentials of the nation has provided that 25% of incomes derived from tourists by hotels in convertible currencies will be exempted from tax; provided that such incomes are set aside in a reserve fund to be utilised within 5 years in expansion of facilities useful for tourism development.

Agriculture.

The Federal Government intends to return Agriculture to its pride of place as the mainstay of the Nigerian economy. Hence, the following incentives were introduced:

Interests earned by financial Institutions on loans granted for agricultural trade or business is tax exempt.
Machinery and equipment purchased for agricultural purposes are exempted from VAT.
Losses incurred by companies engaged in wholly agricultural activities can be carried forward indefinitely.
Companies engaged in wholly agricultural activities are entitled to unrestricted capital allowances.

Gas Utilisation.

Nigeria has over 120 trillion cubic feet of gas reserves, a lot of which is currently been flared. The Federal Government has gone beyond imposition of penalties on oil companies to stop gas flaring. It has introduced generous tax incentives to encourage investment in the utilisation of gas for power generation, fertilizer production, production of liquefied natural gas production etc. These include:

An initial tax holiday of three years, which may, subject to satisfactory performance be renewed for an additional period of two years.
After the tax holiday, an accelerated Capital Allowance of 90% with 10% retention for investment in plant and machinery is allowed.
Interest on any loan obtained with the prior approval of the Minister of Finance for a gas project shall be tax deductible.

Solid Minerals.

As a means of further diversifying its revenue base, the Federal Government has provided a three year tax holiday for companies venturing into the exploitation and mining of solid minerals.

Pioneer Status.

This is a status companies are cloaked with which exempts them from tax liabilities for a period of three years in the first instance and may be extended for a further period of two years based on performance. To qualify for this status, the following conditions must be satisfied:

Investment must be in respect of industry or products designated as PIONEER (the Federal Government maintains a list of industries designated as pioneer).
The applicant must be a public company.
Qualifying capital expenditure must not be less than N50, 000 and N150, 000 for indigenous and foreign companies respectively.

We applaud these fiscal measures evolved for the stimulation of investment and are of the opinion that the Federal Inland Revenue Service (Nigeria’s tax collecting agency) should disseminate information about these tax incentives with as much gusto as they push the tax envelopes. To do otherwise would be to render these tax incentives and all they stand for nugatory.[/vc_column_text][/vc_column][/vc_row][vc_row type=”vc_default” full_width=”stretch_row_content_no_spaces” css=”.vc_custom_1500547593342{padding-right: 100px !important;}” el_class=”noPaddinRow”][vc_column el_class=”noPaddingLeft” offset=”vc_hidden-lg vc_hidden-xs”][vc_raw_html]JTNDZGl2JTIwY2xhc3MlM0QlMjJ0YWItbWFpbi1zdHJpcCUyMiUzRSUwQSUzQ2RpdiUyMGNsYXNzJTNEJTIydGFiLWJsdWUtc3RyaXAwJTIyJTNFJTNDJTJGZGl2JTNFJTBBJTNDZGl2JTIwY2xhc3MlM0QlMjJ0YWItYmx1ZS1zdHJpcDElMjIlM0UlM0MlMkZkaXYlM0UlMEElM0NkaXYlMjBjbGFzcyUzRCUyMnRhYi1ibHVlLXN0cmlwMiUyMiUzRSUzQyUyRmRpdiUzRSUwQSUzQyUyRmRpdiUzRQ==[/vc_raw_html][vc_empty_space height=”25px”][vc_row_inner][vc_column_inner width=”1/6″][/vc_column_inner][vc_column_inner width=”2/3″][vc_custom_heading text=”Nigeria’s Investment Tax Incentives” font_container=”tag:h1|font_size:22|text_align:justify|color:%236699cc|line_height:1.8″ use_theme_fonts=”yes”][vc_column_text]Adam Smith in his book, Wealth of Nations (1776) propounded the Equity, Certainty, Economical and Convenience theory of taxation. Though these pillars of taxation still reign supreme, other ancillary motives have been woven into the fabric of the global tax structure.

Export Promotion and Manufacturing.

The Federal Government of Nigeria encourages the exportation of “Made-in-Nigeria” goods to stimulate growth in the non-oil sector. The following tax incentives are discernable under this head:

Companies engaged in exportation and manufacturing are entitled to unrestricted Capital Allowances.
Any industry set up in an Export Processing Zone (EPZ) with the intention of exporting goods manufactured there will be exempted from tax.
Plant and machinery imported for use in an EPZ are exempted from Value Added Tax (VAT).
Dividends paid by wholly export-oriented companies are exempted from tax.
Interest earned by banks on loans granted by them for export businesses are exempted from tax.

Tourism and Hotel Related Services.

Agriculture.

The Federal Government intends to return Agriculture to its pride of place as the mainstay of the Nigerian economy. Hence, the following incentives were introduced:

Interests earned by financial Institutions on loans granted for agricultural trade or business is tax exempt.
Machinery and equipment purchased for agricultural purposes are exempted from VAT.
Losses incurred by companies engaged in wholly agricultural activities can be carried forward indefinitely.
Companies engaged in wholly agricultural activities are entitled to unrestricted capital allowances.

Gas Utilisation.

An initial tax holiday of three years, which may, subject to satisfactory performance be renewed for an additional period of two years.
After the tax holiday, an accelerated Capital Allowance of 90% with 10% retention for investment in plant and machinery is allowed.
Interest on any loan obtained with the prior approval of the Minister of Finance for a gas project shall be tax deductible.

Solid Minerals.

As a means of further diversifying its revenue base, the Federal Government has provided a three year tax holiday for companies venturing into the exploitation and mining of solid minerals.

Pioneer Status.

Investment must be in respect of industry or products designated as PIONEER (the Federal Government maintains a list of industries designated as pioneer).
The applicant must be a public company.
Qualifying capital expenditure must not be less than N50, 000 and N150, 000 for indigenous and foreign companies respectively.

We applaud these fiscal measures evolved for the stimulation of investment and are of the opinion that the Federal Inland Revenue Service (Nigeria’s tax collecting agency) should disseminate information about these tax incentives with as much gusto as they push the tax envelopes. To do otherwise would be to render these tax incentives and all they stand for nugatory.[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/6″][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row][vc_row type=”vc_default” full_width=”stretch_row_content_no_spaces” css=”.vc_custom_1500547593342{padding-right: 100px !important;}” el_class=”noPaddinRow”][vc_column el_class=”noPaddingLeft” offset=”vc_hidden-lg vc_hidden-md vc_hidden-sm” css=”.vc_custom_1530481040960{padding-right: 75px !important;padding-left: 60px !important;}”][vc_raw_html]JTNDZGl2JTIwY2xhc3MlM0QlMjJtb2ItbWFpbi1zdHJpcCUyMiUzRSUwQSUzQ2RpdiUyMGNsYXNzJTNEJTIybW9iLWJsdWUtc3RyaXAwJTIyJTNFJTNDJTJGZGl2JTNFJTBBJTNDZGl2JTIwY2xhc3MlM0QlMjJtb2ItYmx1ZS1zdHJpcDElMjIlM0UlM0MlMkZkaXYlM0UlMEElM0NkaXYlMjBjbGFzcyUzRCUyMm1vYi1ibHVlLXN0cmlwMiUyMiUzRSUzQyUyRmRpdiUzRSUwQSUzQyUyRmRpdiUzRQ==[/vc_raw_html][vc_empty_space height=”25px”][vc_row_inner][vc_column_inner width=”1/6″][/vc_column_inner][vc_column_inner width=”2/3″][vc_custom_heading text=”Nigeria’s Investment Tax Incentives” font_container=”tag:h1|font_size:22|text_align:justify|color:%236699cc|line_height:1.8″ use_theme_fonts=”yes”][vc_column_text]Adam Smith in his book, Wealth of Nations (1776) propounded the Equity, Certainty, Economical and Convenience theory of taxation. Though these pillars of taxation still reign supreme, other ancillary motives have been woven into the fabric of the global tax structure.

Export Promotion and Manufacturing.

The Federal Government of Nigeria encourages the exportation of “Made-in-Nigeria” goods to stimulate growth in the non-oil sector. The following tax incentives are discernable under this head:

Companies engaged in exportation and manufacturing are entitled to unrestricted Capital Allowances.
Any industry set up in an Export Processing Zone (EPZ) with the intention of exporting goods manufactured there will be exempted from tax.
Plant and machinery imported for use in an EPZ are exempted from Value Added Tax (VAT).
Dividends paid by wholly export-oriented companies are exempted from tax.
Interest earned by banks on loans granted by them for export businesses are exempted from tax.

Tourism and Hotel Related Services.

Agriculture.

The Federal Government intends to return Agriculture to its pride of place as the mainstay of the Nigerian economy. Hence, the following incentives were introduced:

Interests earned by financial Institutions on loans granted for agricultural trade or business is tax exempt.
Machinery and equipment purchased for agricultural purposes are exempted from VAT.
Losses incurred by companies engaged in wholly agricultural activities can be carried forward indefinitely.
Companies engaged in wholly agricultural activities are entitled to unrestricted capital allowances.

Gas Utilisation.

An initial tax holiday of three years, which may, subject to satisfactory performance be renewed for an additional period of two years.
After the tax holiday, an accelerated Capital Allowance of 90% with 10% retention for investment in plant and machinery is allowed.
Interest on any loan obtained with the prior approval of the Minister of Finance for a gas project shall be tax deductible.

Solid Minerals.

As a means of further diversifying its revenue base, the Federal Government has provided a three year tax holiday for companies venturing into the exploitation and mining of solid minerals.

Pioneer Status.

Investment must be in respect of industry or products designated as PIONEER (the Federal Government maintains a list of industries designated as pioneer).
The applicant must be a public company.
Qualifying capital expenditure must not be less than N50, 000 and N150, 000 for indigenous and foreign companies respectively.