Tax and Fiscal Incentives for Startups in the Nigeria StartupBill – Part 1
The Nigeria Startup Bill provides for nine different tax and fiscal incentives that tech-enabled Startups in Nigeria can benefit from, once they become labelled startups under the Bill.
Today a detailed summary of three out of the nine reliefs will be highlighted under their respective titles.
1)Incentives for a labelled startup under the Pioneer Status Incentive Scheme.
Section 24 of the Bill provides that a startup which falls under the industries captured in the extant pioneer status incentive scheme may apply to the Nigerian Investment Promotion Commission (NIPC) for the grant of tax reliefs.
Some of the industries captured under the scheme are; E-commerce services with sales done predominantly or exclusively online, music production, publishing and distribution, production and post-production of digital content for motion pictures, videos, television programmes, commercials, distribution and exhibition, telecommunication, photography, real estate investment vehicles under-investment and securities Act, Mortgaged backed securities under-investment and securities Act, setting up regional/global shared services centres in Nigeria for the provisions and management of technical services. Etc.
You can refer to the Federal Republic Of Nigeria Official Gazzette on the List Of Pioneer Industries And Products Approved By The Federal Executive Council to see all the industries listed therein.
2)Additional tax reliefs
Section 25 of the Bill provides that irrespective of the provisions of any other law, the federal government may simplify the requirements for a startup to benefit from existing fiscal incentives through the federal ministry responsible for finance or any other relevant MDA. It also provides that notwithstanding the provisions of the Industrial Development (Income Tax Relief) Act or any other legislation on tax reliefs, a labelled startup may be entitled to exemption from the payment of any tax chargeable on its income or revenue for a period of four years, in as much as the commencement date of the tax relief is the same date of the issuance of the startup label.
3)Percentage-based tax relief for a labelled startup
Section 26 of the Bill provides that a labelled startup with a minimum of ten employees, 60% of which are employees without any form of work experience, and within three years of graduating from school or any vocation within the assessment period, shall enjoy a 5% tax relief from income tax of its assessable profits in the year of assessment that the profits were generated. Furthermore, the Bill provides that a labelled startupshall be entitled to benefit from this tax relief for a maximum period of five years.
A big well done to the drafters of the bill for coming up with such appealing incentives for startups in Nigeria to ensure rapid growth and expansion even to other parts of Africa. We trust that this has informed you of the various tax incentives available to your startup when the Startup Bill is passed.
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