Analyzing The Start Up Act 2022; Implications For Tech Startups
The Nigerian Start Up Act 2022 is one seminal innovation in her corporate space, embodying notable developments for the Startup industry in Nigeria.
This article seeks to explore important highlights of the Act and weigh the potential impact of a number of them on the startups industry at large.
One of the key inventions of the Act is the creation of the National Council For Digital Innovation And Entrepreneurship. The body, serving as the secretariat of the council is saddled with the responsibility of formulating and implementing policy guidelines for the actualization of the objectives of the Act.
Importantly, the Act has also established the Start Up Act Investment Seed Fund. This is one laudable intervention that will engender a transformative impact on the Start Up Industry. Essentially, selected nascent startups recommended by the fund manager which is the Nigeria Sovereign Investment Authority would be afforded early stage financing while reliefs would equally be open to tech hubs and laboratories.
It’s instructive to note however, that accessibility to the Seed Fund as well as other incentives provided by the Act is subject to a start up obtaining the ‘Startup Label’. In other words, for a startup to enjoy the benefits of the seed Fund, it must obtain a ‘Startup Label’. To qualify for the label, such startup must be a registered limited liability company. Also, it must have been in existence for a period of not more than 10 years from the date of incorporation and must have at least one-third local shareholding held by one or more Nigerians as founder or co-founder of the startup. Additionally, its objects must be digital innovation, production and technology oriented.
It is also crucial to highlight key tax implications of the Act for Startups. The Act has made provisions for robust tax incentives and rebates to be accorded to labelled startups, their employees, and external service providers of such startups.
Thus, startups operating in industries covered by the ‘Pioneer Status Incentive’ are afforded a number of reliefs, incentives and tax holidays. Here, eligible startups are exempted from paying corporate taxes for the first three years, renewable for one or two years.
More importantly, startups having a minimum of ten employees, sixty percent of whom have no work experience and are just within three years of graduation from school or any vocation within the assessment period are eligible for income tax relief of five percent of assessable profits. Investors are also entitled to tax credits to the tune of thirty percent of their investment in the start up.
Furthermore, Startups’ employees are also entitled to personal income tax exemptions of thirty five percent for two years while investors who dispose off assets in relation to a qualifying asset are exempted from capital gains tax.
Perhaps the biggest highlights of the Start Up Act are the plethora of tax rebates and incentives afforded emerging startups as well as accelerated collaboration and synergy between the Nigeria Sovereign Investment Authority, the Secretariat of the Council and other key government parastatals and agencies. There’s also a deepened investor-startup relationship in light of the positive tax structure introduced by the Act. Additionally, the strategic financing initiatives deployed are huge boosters to nascent startups in finding their feet early, ultimately creating an ambient technology space for all startups.
Conclusively, the Start Up Act is a remarkable innovation poised to revolutionize the entire corporate industry. It’s indeed a reflection of Nigeria’s bolstering technology rise and would undoubtedly engender significant future developments.
References
1 Wasilat Azeez, “Seed Funding, Tax Incentives’ highlights of Nigeria’s Startup Act, available at, https://www.thecable.ng/seed-funding-tax-incentives-highlights-of-nigerias-startup-act/amp accessed on January 3, 2023
2 Abosede Adeboye, Nnamdi Obinwa, “The Nigeria Start Up Act 2022: Implications For Tech Startups in Nigeria”, available at, https://www.mondaq.com/nigeria/new-technology/1249936/the-nigeria-startup-act-2022-implications-for-technology-startups-in-nigeria#:~:text=The%20implementation%20of%20the%20Act,well%20as%20access%20to%20funds accessed on Jan 3, 2023