Investment Incentives In Nigeria
- COMPANIES INCOME TAX
The Companies Income Tax Act has been amended in order to encourage potential and existing investors and entrepreneurs. The
current rate in all sectors, except for petroleum, is 30 percent.
- PIONEER STATUS
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. Pioneer status is a tax holiday granted to qualified or (eligible) industries anywhere in the Federation.
- TAX RELIEF FOR RESEARCH AND DEVELOPMENT
Up to 120 percent of expenses on (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and are connected with the business from which income or profits is derived. Also, for the purpose of R&D on Local raw materials, 140 percent of expenses are allowed.
- INVESTMENT IN INFRASTRUCTURE
This is a form of incentive granted to industries that provide facilities that ordinarily, should have been provided by government. Such facilities include access roads, pipe borne water and electricity. Twenty percent (20%) of the cost of providing these infrastructural facilities, where they do not exist, is tax deductible.
- LABOUR INTENSIVE MODE OF PRODUCTION
Industries with high labour/capital ratio are entitled to tax concessions. These are industries with plants, equipment and machinery, which essentially are operated with minimal automation.
Where there is automation, such automation should not be more
than one process in the course of production. The rate is graduated in such a way that an industry employing 1,000 persons or more will enjoy 15 percent tax concession, while an industry employing 200 will enjoy 7 percent and those employing 100 will enjoy 6 percent and so on.
(a) Companies with turnover of less than N1 million are taxed at a low rate of 20% for the first five years of operation if they are in the manufacturing business.
(b) Dividend from companies in manufacturing sector with turnover of less than N1 million is tax free for the first five years of their operation.
(c) Dividends derived from manufacturing companies in petrol chemical and chemical and liquefied natural gas subsector are exempted from tax.
Free Trade Zones
Locating in any Free Trade zone in Nigeria automatically confers on the investor, certain locational advantages as well as very generous incentives. These include:
Relative proximity to major markets of Africa, Europe and America.
Large domestic market for the 25% of production that FTZ producers can sell in the Customs Territory.
Favourable quotas on certain products from Nigeria export to the European Union (EU) and the United States.
Made in Nigeria products enjoy preferential tariffs concessions in EU.
Abundant supply of skilled labour at very competitive rates;
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