Still on our post about the tax and fiscal incentives for start-ups in the Nigeria Start-up bill.
In this part, we proceed to provide you with a detailed analysis of the last three tax and fiscal incentives in the bill.
Analysis Of Tax and Fiscal Incentives For Start-Ups In The Nigeria Start-Up Bill
Section 30 of the Bill provides incentives and reliefs for investors investing in a labelled start-up. It states that the federal government through the ministry of finance and other MDA’s shall develop and also implement a national policy that will contain incentives for individuals, impact investors, angel investors, companies, venture capitalists, private equity funds, accelerators, or incubators who invest in a labelled start-up or the start-up ecosystem in Nigeria. This policy will contain tax credits. The investors enjoy this upon investing.
30(2) states, irrespective of the provisions of the Companies Income Tax Act (CITA), an angel investor, venture capitalist, private equity fund, accelerator or incubator who invests in a start-up shall be entitled to an investment tax credit equivalent to 30% of the investment put into the labelled start-up.
Furthermore, section 30(3) provides Zero Charge on capital gains tax that accrue from asset disposal by an angel investor, venture capitalist, private equity fund, accelerator or incubator. It is important to note at this point that all the tax incentives highlighted above are with respect to labelled start-ups except stated otherwise.
Section 31 of the Bill provides for tax incentives for employees of a labelled start-up. A labelled start-up’s employee that the secretariat and joint tax board approves enjoys a personal income tax exemption of 35%. This lasts for 2 years from the engagement date the labelled start-up gives.
In determining whether an employee is eligible for this incentive, we shall list certain vital criteria that applies, in the subsequent subheading.
Considerations When Determining Employee Eligibility For Incentive
(a) A minimum salary threshold to be determined by the secretariat and the joint tax board
(b) The level of technical skills and expertise of the prospective beneficiary
(c) The level of compliance with registration formalities as may be prescribed by the secretariat from time to time.
Section 32 of the Bill provides that notwithstanding the provisions of any other law, foreign entities that provide technical, professional, or management services to a labelled start-up will be subjected to a five percent withholding tax on income derived from the provision of such services. This applies if the payment of the withholding tax shall qualify as the final tax a company not registered in Nigeria has to pay.
We say well done to the drafters of the bill for coming up with appealing tax incentives such as these, to attract investors into the tech ecosystem in Nigeria. This will provide a viable landscape for venture capitalists and other investors to bring in their best to support innovative ideas and technologies in Nigeria.
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