The federal government through the Nigerian Investment Promotion Commission (NIPC) has granted approvals in principle to six more companies to benefit 3-year tax holiday under its Pioneer Status Incentive (PSI) initiative.
The Commission disclosed this in its Q2 2024 PSI report just released. These new approvals brought the number of companies benefitting from the 3-year tax holiday to 88 at the end of the quarter.
According to the NIPC report, the six new companies added to the list of tax holiday beneficiaries include Dream World Children Park Limited, a construction company focusing on non-residential buildings; Mohalkos Mills Limited, a manufacturer of grain mill products; and Agrira West Africa Limited, manufacturer of edible oils, meals and kernels.
- Others are Greenhills Agricultural Product Limited, a chemical manufacturing company; Hamakang Global Services Limited, an electric power generation, transmission, and distribution company; and Auxano Solar Nigeria Limited, a manufacturer of electronic components.
- The NIPC noted that the approvals in principle granted to the companies are subject to the payment of application fees and only take effect after the payment of such fees.
- The NIPC report showed that 25 new PSI applications were received in the second quarter of this year, while 11 firms applied for an extension of their tax holiday, but only two were approved for an extension.
Why the incentive?
While there have been debates around tax incentives and the substantial revenue loss attributed to annual waivers, the Head of Incentives Administration at the NIPC, Lovina Kayode, recently justified the waivers, noting that the incentives are strategically implemented to enhance foreign investments in the country.
She added that not all companies are granted tax breaks, as the commission adheres to rigorous procedures in awarding waivers.
According to her, the incentive also aligns with the government’s commitment to fostering a conducive business environment and attracting investments.
“The pioneer status incentive is a stimulus that allows a company to get three years of not paying corporate income tax, just to get more investments.
This process is stringent because our parent ministry and the federal inland revenue service are involved to make sure the right investors get this incentive,” she said.
What you should know
A pioneer status incentive grants companies making investments in qualifying industries and products a tax holiday of three years from the payment of company income tax.
- The three-year tax holiday has the possibility of an extension for one or two additional years to enable the industry concerned to make a reasonable level of profit within its formative years.
- Last year, the NIPC said it approved tax holidays for a total of 34 companies.
- The Federal Government recently inaugurated a Joint Committee of staff of the NIPC and the Federal Inland Revenue Service (FIRS) to review the current guidelines for the administration of the PSI, validate the cost of the incentive to Nigeria, and recommend changes to the qualification and administration.