TAX INCENTIVES IN NIGERIA – PIONEER STATUS

Dear Subscriber,

Pioneer Status Incentive is a tax holiday granted to qualifying industries from the payment of corporate income tax for an initial period of three years, extendable for one or two additional years.The Nigerian government recently expanded the list of sectors that qualify for this tax exemption  to include sectors like E-commerce, Animal  Feeds Productions, Entertainment etc

The apparent intent of this initiative is a bid to motivate Entrepreneurs  to invest in these sectors and consequently diversify the Nigerian economy from its over dependency on crude oil.This week we consider the benefits, requirements and process flow for obtaining Pioneer Status Exemption in Nigeria.

BENEFITS

The pioneer status is an exemption granted to qualified industries to skip tax for a period of time therefore making more growth capital available to the Company.

QUALIFIED INDUSTRIES 

The Industrial Development Act qualifies an industry or product as pioneer if:

1. it is not being carried on in Nigeria on a scale suitable to the economic requirements of Nigeria or at all, or there are favourable prospects of further development in Nigeria;
2. it is expedient in the public interest to encourage the development or establishment of such industry in Nigeria.

The newly expanded list is detailed below:

• Mining and processing of coal;
• Processing and preservation of meat/poultry and production of meat/poultry products;
• Manufacture of starches and starch products;
• Processing of cocoa;
• Manufacture of animal feeds;
• Tanning and dressing of Leather;
• Manufacture of leather footwear, luggage and handbags;
• Manufacture of household and personal hygiene paper products;
• Manufacture of paints, vanishes and printing ink;
• Manufacture of plastic products (builders’ plastic ware) and moulds;
• Manufacture of batteries and accumulators;
• Manufacture of steam generators
• Manufacture of railway locomotives, wagons and rolling stock;
• Manufacture of metal-forming machinery and machine tools;
• Manufacture of machinery for metallurgy;
• Manufacture of machinery for food and beverage processing;
• Manufacture of machinery for textile, apparel and leather production;
• Manufacture of machinery for paper and paperboard production;
• Manufacture of plastics and rubber machinery;
• Waste treatment, disposal and material recovery;
• E-commerce services;
• Software development and publishing;
• Motion picture, video and television programme production, distribution, exhibition and photography;
• Music production, publishing and distribution;
• Real estate investment vehicles under the Investments and Securities Act;
• Mortgage backed securities under the Investments and Securities Act; and
• Business process outsourcing.

REQUIREMENTS

1. A non-current tangible asset of over one hundred million naira (N100 million) shall be deemed as satisfiable.
2. An applicant must provide evidence of all required legal and regulatory compliance documentation.
3. An applicant must demonstrate the tangible impact its activity (project) will have on Nigeria’s economic diversity and growth, industrial and sectoral development, employment, skills and technology transfer, export development and import substitution.
4. An applicant must make full payment of fees promptly, when due.
5. During the pioneer period, a performance report must be submitted to NIPC annually for monitoring and evaluation purposes.

PROCESS FLOW 

CONCLUSION 

Nigeria’s teeming consumer population makes it a major capital investment destination and initiatives like the Pioneer Tax will definitely encourage more participation in the specified sectors.