Taxes are fees individuals, businesses, etc pay to ensure society runs following rules decided upon. Taxes are structured at different levels of income, at different rates, on a gradually increasing scale.
Since businesses use government services, it is normal that they fund their share of the expenses. However, governments usually create tax holidays as incentives for business investments.
Owing to this, the Nigerian government plans to reduce corporate taxes for the purpose of attracting foreign direct investment or stimulating growth in selected industries.
So, following the conclusion of critical reforms to the incentive regime, the Federal Government on Monday announced the lifting of the administrative suspension on processing Pioneer Status Incentives applications.
The new guidelines for PSI applications as well as a revamped list of pioneer industries and products states that:
- Pioneer Status Incentive is a tax holiday granted to qualified or eligible industries anywhere in Nigeria.
- 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.
- An administrative suspension was placed on the processing of PSI applications in September 2015, to allow for a comprehensive review and reform of the incentive regime.
- The Federal Executive Council had at its last meeting approved the lifting of the suspension, a new guideline and a revamped Pioneer list.
- Based on the revamped Pioneer list, the government has added 27 key industries into the scheme and the deleted two other industries.
- The government would review the list of Pioneer industries once in every two years going forward.
- In line with the reform provisions, all additions will be included in the list immediately, and all deletions will be removed from the list in three years.
- A review of the list of Pioneer industries and products was done to bring it in line with the economic realities as set out in the Economic Recovery and Growth Plan.
- The review of the scheme is aimed at increasing transparency and process efficiency, as well as improving the Federal Government’s ability to measure the impact of the incentive.
- To reduce the level of abuse of the scheme, the minister said that the scheme would be managed in an open and transparent manner.
- The new guidelines would grant 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.
Evidently, the Federal Government is committed to encouraging and attracting investments into critical sectors of the economy which will significantly impact development and deliver key benefits to the country. These benefits include economic growth and diversification; industrial and sectoral development; employment; skills and technology transfer; export development; and import substitution.
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