I know the news trending all over Nigeria in the last week was the recent PAY TV Company, TSTV Africa’s emergence in Nigeria and the granting of a 3-year tax exemption by the Minister of Information and Culture, Alhaji Lai Mohammed.
The thing is a lot of Nigerians are not actually aware that they can also enjoy tax exemption just like TSTV. If you know that your business is new and you do not know whether you qualify for tax exemption in your first three year of business, then you need to be on this post right now.
Table of Contents
- 1 Tax Exemption for companies in pioneer status
- 2 Major provisions in the NIPC Pioneer Status Regulations are:
- 3 What do you need to make the application to NIPC?
- 4 Please note that a pioneer status certificate application may be disqualified on the following basis:
- 5 There are also ground of revocation of a pioneer status certificate after it has been given if:
- 6 Businesses that are in what is said as Pioneer Relief
- 7 Application guidelines for Pioneer Status Incentive
Tax Exemption for companies in pioneer status
The National Investment Promotion Commission (NIPC) issued a regulation effective 2014 guiding how the pioneer status incentive is applied for and given. They also issued the various procedures on how companies should go about the application.
The pioneer status tax exemption scheme, ruled by the Industrial Development Income Tax Relief Act, is an incentive that is aimed at increasing investment opportunities in the country. This incentive scheme gives out tax holidays ranging from 3-5 years to companies to assist them in growing and also expand investment in certain sectors that are lacking.
The NIPC also stated in the regulations the grounds for disqualification of application, and also revocation grounds among which is the inability for the company issued the pioneer status to make use of the tax savings that would have accrued to it as a result of the pioneer status incentive.
Apart from the general exemption from Companies Income Tax, the dividends distributed during the period when a company is under the pioneer status will be exempted from withholding tax and capital expenditures incurred during this period will be deductible from profits after the end of the tax relief period.
Major provisions in the NIPC Pioneer Status Regulations are:
1. Applicants for pioneer status incentive must be a body corporate
2. Applicants must have incurred capital expenditure that is not less than N10 million naira ( This means your total fixed assets should not be less than N10 million naira)
3. There is also a requirement of N200,000 non-refundable processing fee payable to the NIPC on the basis of the application for pioneer status incentive
4. The pioneer status application should be made within one year of the applicant’s commencement of business operations.
Additional cost implications for application for pioneer – service charge
A 2% service charge was introduced by the NIPC to be determined by the application estimated tax savings over the period when the pioneer status will be in full force. An applicant will be expected to submit a five year projection financially along with the application made for the pioneer status.
This will enable the commission determine the projected tax savings and also enter into an agreement with the applicant that the projected tax savings should be used to improve the Nigerian economy in the event that the pioneer incentive is approved.
Where it is noticed that the financial projections is a loss position for an applicant, the service charge will be the higher of 0.5% of the applicant’s net assets or 0.25% of its turnover.
What do you need to make the application to NIPC?
You must fill the NIPC Form 2 ( An application form for pioneer status certificate) which cost N40,000 previously but now received for free is to be submitted and the following should be considered before making the application:
- Applicant should be involved in the activity stated to be a pioneer activity
- Applicants should make all legal and regulatory compliance documents available for sighting and submission
- Applicant must demonstrate the impact of the business operations on Nigeria’s economy and there should be visible outline of how the business will affect the industrial, employment, skill, technology growth of the country.
Please note that a pioneer status certificate application may be disqualified on the following basis:
- If the applicant’s capital expenditure is less than N10 million
- If the applicant’s information submitted are false and misleading
- If it is established that there may be reasons for abuse of pioneer status incentive
There are also ground of revocation of a pioneer status certificate after it has been given if:
- There is a contravention of the provisions of the NIPC Act
- If there is a possibility of tax evasion based on the pioneer status incentive
- If financial accounts were manipulated with the intention to reduce certain charges
- If the applicant defaulted to utilize the tax savings accrued from the pioneer status incentive
When all the criteria for application is met and the NIPC approves the status, an approval letter is sent to the Industrial Inspectorate Division (IID) of the Federal Ministry of Industry, Trade and Investment which will be used to process the production day certificate (PDC). A pioneer certificate is thereafter issued after the NIPC received the (PDC).
Businesses that are in what is said as Pioneer Relief
|1||Cultivation, Processing and Preservation of food crops and fruits||Preserved canned foodstuff and fruits, tea, coffee, refined sugar, tomato puree/juice etc.|
|2||Integrated dairy production||Butter, cheese, fluid milk and powder, ice cream (by products, livestock, minor edible products).|
|3||a) Deep sea trawling and processing b) Coastal fishing and shrimping||Preserved sea foods, fish and shrimps, fishmeal|
|4||Mining lead, zinc, and iron and steel from iron ore||Iron and steel products|
|5||Manufacture of iron and steel from Iron ore||Iron and steel products|
|6||The smelting and refining of non-ferrous base metal and the manufacture of their alloys||Refined non-ferrous base metal and their alloys|
|7||Mining and processing of barytes, bentonites and associated minerals||Barytes, bentonites and associated minerals|
|8||Manufacture of oil well drilling materials containing a predominant proportion of Nigerian raw materials||Barytes, bentonites and associated minerals|
|9||The manufacture of cement||Cement, clinker|
|10||Manufacture of glass and glassware||Sheet glass, pharmaceuticals and laboratory glass wares|
|11||Manufacture of lime from local limestone||Lime|
|12||Quarrying and processing of marbles||Marbles and processed marbles|
|13||Manufacture of ceramic products||Refractory and heat insulating constructional products, laboratory ware|
|14||Manufacture of basic and intermediate||chemicals;iii) Fertilizers;iv) Petro-chemical;v) Caustic soda and chlorinevi) Pesticide and insecticide|
|15||Formulation and manufacture of pharmaceuticals||Pharmaceuticals, health vitamins|
|16||Manufacture of yeast, alcohol and related products||Yeast, industrial alcohol and related products|
|17||Manufacture of paper pulp||Paper pulp|
|18||Manufacture of yarn and man-made fibres||Yarn and synthetic fibres|
The new industries recently added to the list are:
1. Mining and processing of coal;
2. Processing and preservation of meat/poultry and production of meat/poultry products;
3. Manufacture of starches and starch products;
4. Processing of cocoa;
5. Manufacture of animal feeds;
6. Tanning and dressing of Leather;
7. Manufacture of leather footwear, luggage and handbags;
8. Manufacture of household and personal hygiene paper products;
9. Manufacture of paints, vanishes and printing ink;
10. Manufacture of plastic products (builders’ plastic ware) and moulds;
11. Manufacture of batteries and accumulators;
12. Manufacture of steam generators;
13. Manufacture of railway locomotives, wagons and rolling stock;
14. Manufacture of metal-forming machinery and machine tools;
15. Manufacture of machinery for metallurgy;
16. Manufacture of machinery for food and beverage processing;
17. Manufacture of machinery for textile, apparel and leather production;
18. Manufacture of machinery for paper and paperboard production;
19. Manufacture of plastics and rubber machinery;
20. Waste treatment, disposal and material recovery;
21. E-commerce services;
22. Software development and publishing;
23. Motion picture, video and television programme production, distribution, exhibition and photography;
24. Music production, publishing and distribution;
25. Real estate investment vehicles under the Investments and Securities Act;
26. Mortgage backed securities under the Investments and Securities Act; and
27. Business process outsourcing.
Application guidelines for Pioneer Status Incentive
You can check out the explicit details of application guidelines for Pioneer Status incentive as issued by the Federal Ministry of Trade and Investment here.