1.
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:
1.
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.
2.
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.
3.
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.
4.
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:
(a)
of
acquisition of landed property and installation of requisite equipment;
(b)
of
development carried out at factory site;
(c)
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.
2.
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:
a)
Import Bill of Entry (Customs and Excise Form
C188).
b)
Import Bill of Lading for the raw material inputs
used for the export production.
c)
Letter of Contract Agreement between the importer
and exporter of the raw materials.
d)
Current Registration Certificate with Nigerian
Export Promotion Council.
e)
Export Bill of Entry (Custom and Excise Form Sale
98)
f)
Bank Bond to be issued by a recognized bank or insurance
company to the tune of 60% of the amount claimed.
3.
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:
a)
relaxation
of money laundering laws;
b)
purchase
of foreign currency at official exchange rate to service the loan; and
c)
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.
4.
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:
a)
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.
b)
Complete
Form DCP/1 and support with the following documents certified by either a court
or Notary public:
1.
Certificate
of Incorporation
2.
Memorandum
and Articles of Association
3.
Feasibility
Report(s)
4.
Three(3)
years Financial Statements of beneficiary company
5.
Other
related/useful document which could facilitate decision making on the
Application.
5.
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:
a)
Open
a foreign currency domiciliary account with any authorized dealer;
b)
Open
special non-resident naira account;
c)
Buy
shares in Nigerian companies out of naira account;
d)
Repatriate
capital, dividends and incomes at autonomous market rates minus taxes;
e)
Purchase
of foreign currency at official exchange rate; and
f)
Enjoy
relaxation of money laundering laws.
6.
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.
© Onyekachi Duru Esq and www.legalemperors.com,
2016 (All Rights Reserved). Unauthorized use and/or duplication of this
material without express and written permission from this site’s author and/or
owner is strictly prohibited. Excepts and links may be used, provided that full
and clear credit is given to Onyekachi
Duru Esq and www.legalemperors.com with appropriate and specific directions to the
original content.