Who doesn’t need a tax holiday? Nobody, that’s who!
Know the saying ”A tax cut is the kindest cut of all?
Well, a tax holiday is the kindest holiday of all, rivaled only by an all-expense paid trip to the Bahamas on a private yacht of your choosing!
Introducing, the Nigerian Pioneer Status.
New guidelines on the Pioneer Status Incentive (PSI) were introduced by the Federal Ministry of Industry, Trade and Investment (FMITI) just this month
Before we get lost in the world of almost non-existent tax holidays, let us take a step back and understand what the pioneer status really is and why Nigeria is even bothering.
Let’s face it, Nigeria’s economy could use a little help, okay maybe a lot of help.
Before this recent one, our economy last experienced a recession in 1991. In July 2016, the yearly inflation rate skyrocketed to 17.1 percent from 16.5 percent in June which is more than a 10-year high. Food inflation also rose to 15.8 percent from 15.5 percent.
This is 2017, and though there have been projections of Nigeria coming out of recession this year, we are still staggering from the aftershocks.
With such statistics, the government definitely understands that unfavourable tax environments do more harm than good to the growth of any economy.
The wise thing to do? Put incentives in place to cushion the effects of the harsh economic reality.
Now, where were we with the tax holiday?
In simple speak; the pioneer status incentive is a tax holiday. (Maybe the Bahamas might not seem so far off after all). This holiday is given to companies for a period of time to encourage the growth and development of the Nigerian economy.
How it works
Here’s where the scheme does not discriminate. A new or existing company is eligible, provided there is an expansion plan in view. You may apply for a certificate of pioneer status (It lasts for 3 years and is renewable upon application for 2 years)
And if your industry is located in an economically disadvantaged local government area, even better! You may get a seven-year tax holiday!
And that’s why you do not qualify if…
First things first, not every business qualifies for the pioneer status.
Konga and Jumia do not qualify, Mavin records does not qualify, GTBank does not qualify, MTN does not qualify, get the idea?
According to the Executive Secretary, Nigerian Investment Promotion Council, NIPC, Yewande Sadiku…
“Businesses that have existed for several years in a particular sector may not enjoy the pioneer status…
“The pioneer status actually applies to those involved in their first year of business or operations. Clearly, those older than that would not benefit,”
The objective of pioneer status is to attract more people to invest in sectors that have no investments. We need to get our economy out of the woods.
Here’s the list of the newly approved industries:
- E-commerce services;
- Software development and publishing;
- Motion picture, video and television programme production, distribution, exhibition and photography;
- Manufacture of leather footwear, luggage, and handbags;
- Processing and preservation of meat/poultry and production of meat/poultry products;
- Manufacture of household and personal hygiene paper products;
- Music production, publishing and distribution;
- Processing of cocoa;
- Mining and processing of coal;
- Manufacture of animal feeds;
- Manufacture of starches and starch products;
- Business process outsourcing
- Tanning and dressing of Leather
- 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;
- Real estate investment vehicles under the Investments and Securities Act; and
- Mortgage backed securities under the Investments and Securities Act;
Who is in charge?
The Nigerian Investment Promotion Commission (NIPC) is the body in charge of administering the PSI.
Now to serious speak, here are the requirements to apply successfully for the pioneer status
1. Download Application Form. Download guidelines, application form and project presentation form. Complete Part I of the form. The form can be downloaded here .
2. Write to the NIPC, indicating relevant pioneer industry within which the company falls. It’s share capital and its non-tangible current assets. In the letter also request for a date to present project to the NIPC
3. Present Project. Present Project on set date. You can view the project presentation format guidelines here.
4. Make Fee Payment. Payment includes application and due-diligence fees. You can view fee schedule
5. Submit Application. Submit application with supporting documents like company information, project cost, shareholders, directors and management, training cost, skills and technology transfer etc.
6. Due Diligence. The NIPC will conduct a legal, regulatory, and compliance due diligence. The NIPC will also visit the project to verify status
7. Pay Service Charge Deposit. If the NIPC makes a decision to grant the business a Pioneer Status, the company has to pay a service charge deposit within a week
8. Approval-in-Principle. After receiving the service charge deposit, the NIPC will grant an approval-in-principle and send copies to the Federal Inland State Revenue Service (FIRS), Industrial Inspectorate Department of the FMITI (IID) and state ministries
9. Apply for Production Day Certificate. Complete part II of the Application form, submit it to the IID. Upon reviewing application and inspecting the project, the IID will determine a Production day and issue a Production Day Certificate,
10. Certificate issued. The IID will notify the NIPC that a production day certificate has been issued then the NIPC will issue a Pioneer Status Incentive Certificate (PSI Certificate)