NIGERIA LAW AND PRACTICE Contributed by: Chinyerugo Ugoji, Tiwalola Osazuwa, Rebecca Ebokpo, Jibrin Dasun, Peretimi Akinmodun, Onyinyechi Chima and Princess Otah, ǼLEX
the National Information Technology Develop - ment Agency (“labelled start-ups”) can deduct 100% expenditure on research and develop - ment. The following incentives are peculiar to labelled start-ups: • exemption from contributions to the Industrial Training Fund if the start-up provides in- house training to its employees for the dura - tion of the start-up label; • investment tax credit equivalent to 30% of their investment in labelled start-ups, applica - ble to gains on investments that are subject to tax; • exemption of gains arising from the disposal of the shares of a labelled start-up from CGT, provided that the shares have been held for a minimum of 24 months; and • reduced WHT rate of 5% on income derived by non-resident companies that provide tech - nical, consulting, professional or management services to a labelled start-up. Foreign-earned passive income brought into Nigeria through any of the commercial banks is exempt from CIT. CIT exemption of 70%, 40% and 10%, respec - tively, are applicable to interest on long-term for - eign loans with repayment periods above seven years (with a two-year grace period), those with repayment periods between five and seven years (with not less than 18 months’ grace period), and those with repayment periods between two and four years (with not less than 12 months’ grace period). Venture capital companies that invest in venture capital projects and provide at least 25% of the total project cost enjoy a 50% WHT reduction
on dividends received from project companies and capital allowance on their equity invest - ments in venture project companies, as well as tax exemption on gains arising from the disposal of such equity. Companies engaged in crude oil production enjoy an investment tax credit (ITC) or an invest - ment tax allowance (ITA) of between 5% and 50% of their qualifying expenditure. The ITC operates as a full tax credit and does not result in a deduction from qualifying capital expenditure for the purposes of calculating capital allowanc - es. The ITA is deductible from profits in arriving at taxable profits. Companies that convert to the fiscal regime of the Petroleum Industry Act will not enjoy the ITA and ITC incentives. A company engaged in a “pioneer industry” or in the production of a ”pioneer product” (as designated by the government of the day) may apply for “pioneer status”, which, when granted, entitles it to: • a three-year tax holiday, which may be extended for two further terms of one year each or for one further term of two years; • relief from WHT on dividends paid to its shareholders during the tax holiday; and • the postponement of capital allowance until the end of the tax holiday. Approved enterprises operating within a free trade zone are exempt from all federal, state and local government taxes, levies and rates. 5.4 Tax Consolidation Nigerian law does not permit consolidated tax grouping; each company within a group is there - fore taxable in Nigeria on an individual basis. Consequently, losses suffered by one member of a group of companies cannot be used to reduce
575 CHAMBERS.COM
Powered by FlippingBook