Incentives in the Power Sector:
The Federal Government of Nigeria has set-up several incentives to attract foreign direct investment into the power sector. The incentives include:
- Tax Holidays of up to 5 years
- Exemption from Duty Taxes on imported equipment
- Capital & Investment Allowance which can be carried forward and used after tax holiday period
- Manufacture of transformers, meters, control panels, switchgears, cables and other electrical related equipment are considered as pioneer products/industries. As a result, there is tax holiday of 5 to 7 years for investors who invest in these areas.
- Power plants using gas are assessed under the companies income tax act at a reduced rate of 30%
- 100% foreign ownership of Electricity plants
- Repatriation of profit with a 5% withholding tax
- Instituting a politically independent, and transparent regulatory agent for the power sector that will effectively enforce the established regulatory framework
- Putting in place the necessary foundations e.g. reliable transmission infrastructure that would create a level playing field for efficient private sector participation in the electricity supply
- Implementing a transparent and predicated tariff adjustment mechanism that will cover cost of production and provide adequate returns on investment at all times.
Incentives in the Telecommunications Sector
- Good tariff structure, which ensures that investors recover their investment over a reasonable period of time.
- Import duty on all telecoms equipment reduced from 25% to 5%.
- Measures on speedy clearance of goods at the ports.
- Exclusivity period for licences, e.g. 5 years for the GSM licences, 3 years for long distance international gateway operators.
- Pioneer status for five years (under industrial Development (Income Tax Relief) Act 1990) is offered to interested investors who want to set plants for the manufacture of telecoms equipment in the country.
Incentives in the Solid Minerals Sector:
- Three to five years tax holiday for new mining companies, and a system of deferred royalty payment that is determined by the level of the investment and the strategic nature of the project. Also possible is capitalization of expenditure on exploration and surveys;
- Companies profits tax reduction from 30% to 20%;
- Roll-over relief from Capital Gains Tax.
- Capital Allowance of 95% for Mining companies replacing their Plant and Equipment and 75% for companies with Mining Lease.
- Extension of infrastructure such as roads and electricity to mining sites;
- Provision of 100% foreign ownership of mining companies or concerns;
- Tax Relief on Interest Income: Interest accruing from loans granted by banks in aid of export activities enjoys favourable tax treatment.
- Capital Assets Depreciation Allowance: The law in Nigeria provides an additional annual depreciation allowance of 5% on plants and machinery to manufacturing exporters who export at least 50% of their annual turnover provided that the product has at least 40% local raw material content or 35% value added.
Incentives in the Free Trade Zones:
- Exemption from all Federal, State and Local Government taxes, levies and rates.
- Approved enterprises shall be entitled to import into a Zone, free of customs duty on capital goods, consumer goods, raw materials, components and articles intended to be used for purposes of and in connection with an approved activity.
- Freedom from legislative provision pertaining to taxes, levies. Duties and foreign exchange regulations.
- Repatriation of foreign capital on investment in the zone at any time with capital appreciation of the investment.
- 100% foreign or local ownership of factory allowable.
- One stop approvals, (factory management deals with only the management of the zone) which grant all licenses whether or not the business is incorporated in the Customs territory.
- Unrestricted remittance of profits earned by investors.
- Permission to sell 100% of total production in the domestic market.
- No import or export license.
- Rent free land at construction stage, thereafter rent shall be as determined by the management of the zone. Foreign manager and qualified personnel may be employed by companies operating in the Zones.
- Operations within a zone shall commence on the date when the constructions of the perimeter fence and gate have been completed and the Authority has declared it so.
Compiled from the Nigeria Investment Promotion Commission.
For more information, visit www.nipc.gov.ng |
