The Federal
Government on Monday announced the lifting of the administrative suspension on
processing pioneer status incentives applications for prospective
investors in
the country.
The Ministry
of Industry, Trade and Investment said the decision to lift the suspension
followed the conclusion of critical reforms to the incentive regime aimed at
promoting investments in the country.
The Ministry
has also released new guidelines for PSI applications as well as a revised list
of industries and products qualified for conferment with the pioneer status.
At the end
of the Executive Council of the Federation, FEC, meeting last week, Minister of
Industry, Trade and Investment, Okechukwu Enelamah, had disclosed the approval
of the revised list of 27 key industries to benefit from the new arrangement.
The minister
said the FEC arrived at the new list after acceptin the recommendation that two
industries, among them mineral oil prospecting, which was previously governed
by the Petroleum Profit Tax, PPT, be removed as one of the beneficiaries of the
pioneer industries list governed by the Companies Income Tax Act.
Although
details of the affected industries were being perfected by the Nigerian
Investment Promotion Council, NIPC, Minister of Information, Lai Mohammed,
confirmed later the music industry was one of them.
At a
briefing in his office on Monday, Mr. Enalemah said the names of the other 26
industries would soon be released to the public.
Under the
reviewed provisions guiding the incentive, the minister said all industries
removed from the list of beneficiaries would take effect within three years.
He explained
that the review was necessary to bring the list of pioneer industries and
products in line with the country’s current economic realities captured under
the National Economic Recovery and Growth Plan, ERGP, of the federal
government.
“The Federal
Government is committed to encouraging and attracting investments into critical
sectors of the economy, to significantly impact development and deliver key
benefits to the country,” he said.
“These
benefits include economic growth and diversification, industrial and sectoral
development, employment, skills and technology transfer, export development and
import substitution,” he added.
Also, the
Executive Secretary, NIPC, Yewande Sadiku, said the reforms by the government
have further brought clarity, predictability and process efficiency to the PSI
regime.
“We will
continue with the reform process as we plan to take the PSI application process
online. We will also engage with relevant stakeholders with a view to updating
the existing legislations,” she said.
Pioneer
status is a tax holiday granted by government to companies interested in
investing in difficult sectors of the economy with the understanding that
profits from their operations would be ploughed back to the business, to create
jobs and boost the growth of the economy.
The pioneer
incentive scheme is governed by the Industrial Development Income Tax Relief
Act to allow tax holidays to be granted industries not necessarily engaging in
pioneering activities, but considered by government not mature and requiring
support to grow.
Under the
current arrangement, pioneer status grants a beneficiary company an initial
five years tax holiday, subject to additional three years on approval.
However, in
September 2015, the government had imposed an administrative suspension on
further processing of PSI applications, to allow for a comprehensive review and
reform of the incentive regime.
The
government has said the reform was necessary to help increase transparency and
process efficiency, better articulate the expected economic benefits, and
improve its ability to measure the impact of the incentive.
Under the
new application guidelines, information on the considerations for assessing new
PSI and extension applications would be provided online.
Besides, the
guidelines further outlines the application processes and timelines as well as
the obligations of beneficiaries.
The PSI
grants companies making investments in qualifying industries and products a tax
holiday from the payment of company income tax for an initial period of three
years, with the possibility of an extension for one or two additional years.
Conditions
for an industry or product to be designated with a pioneer status include if it
was not being carried on in Nigeria on a scale suitable to the economic
requirements of the country or not at all.
Either where
there are favourable prospects for further development, or if it was expedient,
in the public interest, to encourage the development and establishment of the
industry in Nigeria.
The Nigeria
LNG has been one company in the country that was granted pioneer status when it
commenced business in 1989, to enable it venture into the business of
harnessing Nigeria’s abundant natural gas resources for exports.
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