Pioneer Status: This is granted by the Nigerian Investment Promotion Commission to a public company that has invested in industrial products regarded or designated as pioneer. For example, agro-allied, export goods produced from locally sourced raw materials, solid minerals, etc. It is granted for three (3) years at first instance and renewable for 2 years. Pioneer Status results in tax exemption or holiday. The estimated cost of qualifying capital expenditure on or before the production date is not less than N150,000 naira for indigenous companies and N5,000,000 naira for foreign companies. The relief is granted pursuant to the Industrial Development (Income Tax Relief) Act.
Again, Pioneer Status is issued by the Nigerian Investment Promotion Commission, pursuant to the Industrial Development (Income Tax Relief) Act, to the effect that the qualified/eligible company is exempted from payment of tax for between 3-5 and 7 years. Thus, the incentive for is for the pioneer company to enjoy tax holidays for the stipulated period. The 7 years tax holiday is reserved for pioneer industries located in economically disadvantaged local government area of the Federation. The grant of Pioneer Status to an industry is aimed at enabling the industry concerned to make a reasonable level of profit within its formative years. The profit so made is expected to be ploughed back into the business. The status is granted only to companies involved in the products listed. Where the activities of a company include the production of pioneer and non-pioneer products, the tax relief is only available on income derived from pioneer products only.
How to qualify and apply for pioneer status:
- The first step is to qualify by ensuring that the product/activities of the company is among the list of the pioneer industries in Nigeria.
- The joint venture company or a wholly foreign company must have incurred a capital expenditure of not less than Five Million naira (N5m) while that of qualified indigenous company should not be less than N150,000.00k.
- The application for pioneer status must be submitted within one year of the applicant company starting commercial production otherwise the application will be time-barred.
- Complete NIPC Form II (to be purchased from the Nigerian Investment Promotion Commission and same should be returned with original purchase receipt, as well as accompanied with the evidence:
- of acquisition of landed property and installation of requisite equipment;
- of development carried out at factory site;
- that the industry is not being carried on in Nigeria on a scale suitable to the economic development and requirements of Nigeria or at all or that there are favourable prospects for further developments in Nigeria of such industry.
Duty Drawback and Suspension Scheme: This is an incentive granted by the Duty Drawback Committee Service pursuant to the Export Incentives and Miscellaneous Provisions Act. The scheme provides for 100% refund of import duties on raw materials including packaging materials used in manufacturing goods that are exported or meant for export; paper used in manufacturing goods that are supplied for educations purposes to educational establishments recognized by the Federal Advisers on Education; and goods exported in the state in which they were imported.
Again, Duty Drawback/Suspension Scheme incentive allows importers of materials used in the manufacture of exported goods to claim repayment of import duties earlier paid in respect of the materials after goods are exported: Export (Incentives and Miscellaneous Provision) Act. The Duty Drawback Scheme is administered by the Duty Drawback Committee established under Export (Incentives and Miscellaneous Provisions) Act. Duty drawback application must be made within a maximum of two years from the date of exportation.
How to Apply for Duty Draw Back:
Application Form is obtainable from the Duty Drawback Secretariat in Abuja and all Zonal Offices of the Nigerian Export Promotion Council (NEPC), currently in Lagos, Port Harcourt, Enugu, Kano and Jos. Completed Application form is submitted with attached copies of the following documents in triplicates, to any of the zonal offices of Nigerian Export Promotion Council:
- Import Bill of Entry (Customs and Excise Form C188).
- Import Bill of Lading for the raw material inputs used for the export production.
- Letter of Contract Agreement between the importer and exporter of the raw materials.
- Current Registration Certificate with Nigerian Export Promotion Council.
- Export Bill of Entry (Custom and Excise Form Sale 98)
- Bank Bond to be issued by a recognized bank or insurance company to the tune of 60% of the amount claimed.
Tax Reliefs on Foreign Loans: This is a relief under section 11 of the Companies Income Tax Act which exempts the interest on a loan to be repaid in 10 years from tax; and which allows of only half of the chargeable tax for interests on loans to be repaid after 5 years.
Indeed, the following benefits accrue to an alien importing capital/foreign loan through an authorized dealer (Central Bank of Nigeria or any commercial bank it licenses) and who has obtained Certificate of Capital Importation:
- relaxation of money laundering laws;
- purchase of foreign currency at official exchange rate to service the loan; and
- Unrestrained/easy repatriation of capital/profit to home country without expropriation.
Please also note that Tax Exemption is granted to Incorporated Trustees, Companies Limited by Guarantee, Co-operative Societies, and Charitable/Religions Organizations.
Debt-Equity Conversion Programme: Capital can also be imported through the Debt-Equity Conversion Programme. This entails the exchange of a country’s foreign currency debt for local currency that can be used for establishment of new business (Foreign Direct Investment) or purchase of shares in existing business, whether privately or publicly owned (Foreign Portfolio Investment). It is a feature of the deregulation programme introduced by the Federal Military Government in 1988. The programme allows a foreigner under the Debt Equity Conversion Programme implemented by Debt Conversion Committee (DCC) in Central Bank of Nigeria who has say 5 Million dollars to invest much more than that by purchasing Nigeria’s debt instrument from any stock exchange in the world at a discounted value with a certificate obtained; and brought to Nigeria to claim a high value for business.
The benefits of Use of Debt Equity Scheme are that apart from purchase of foreign exchange at discounted rate, there is guarantee of repatriation of the profits/capital dividends derived from the initial capital outlay, which can be done at any time of the investor’s choice. The investor also obtains Certificate of Capital Importation (CCI) and also enjoys other benefits of use of the Certificate of Capital Importation.
The Debt–Equity Scheme Programme is open to companies and individuals; foreigners and Nigerians, resident or non residents. To participate, a company must have a minimum paid-up capital of N5,000,000. The minimum amount of debt conversion to be considered under the scheme shall be $250,000 (dollars).
The application Procedure for the Debt-Equity Scheme is as follows:
- Any company intending to participate in the programme must first obtain the prior consent or Approval-in-Principle from the Debt Conversion Committee of the Central Bank of Nigeria.
- Complete Form DCP/1 and support with the following documents certified by either a court or Notary public:
- Certificate of Incorporation
- Memorandum and Articles of Association
- Feasibility Report(s)
- Three(3) years Financial Statements of beneficiary company
- Other related/useful document which could facilitate decision making on the Application.
Capital Importation through Authorized Dealer: The benefits of Capital Importation through Authorized Dealer is that obtaining Certificate of Capital Importation (CCI) entitles the foreign investor to:
- Open a foreign currency domiciliary account with any authorized dealer;
- Open special non-resident naira account;
- Buy shares in Nigerian companies out of naira account;
- Repatriate capital, dividends and incomes at autonomous market rates minus taxes;
- Purchase of foreign currency at official exchange rate; and
- Enjoy relaxation of money laundering laws.
Tax Relief On Double Taxation Treaties: Where a Nigerian registered foreign company which has paid or is liable to pay tax, proves that it has paid the tax in a Commonwealth or another country that has double taxation agreement with Nigeria, the company will be entitled to relief from tax paid or payable by it. This is in form of bilateral agreements and Nigeria has such treaties, enabling taxation relief with some countries. Moreover, in the event that the foreign tax rate is less than that of Nigeria, the rate of relief would be one half of the foreign rate. However, if the foreign rate is more than the Nigerian rate, the relief will be equal to the amount by which the foreign rate exceeds the Nigerian rate.
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