The Federal Government on Monday announced the lifting of the administrative suspension on processing pioneer status incentives applications for prospective investors in the country.
The Ministry of Industry, Trade and Investment said the decision to lift the suspension followed the conclusion of critical reforms to the incentive regime aimed at promoting investments in the country.
The Ministry has also released new guidelines for PSI applications as well as a revised list of industries and products qualified for conferment with the pioneer status.
At the end of the Executive Council of the Federation, FEC, meeting last week, Minister of Industry, Trade and Investment, Okechukwu Enelamah, had disclosed the approval of the revised list of 27 key industries to benefit from the new arrangement.
The minister said the FEC arrived at the new list after acceptin the recommendation that two industries, among them mineral oil prospecting, which was previously governed by the Petroleum Profit Tax, PPT, be removed as one of the beneficiaries of the pioneer industries list governed by the Companies Income Tax Act.
Although details of the affected industries were being perfected by the Nigerian Investment Promotion Council, NIPC, Minister of Information, Lai Mohammed, confirmed later the music industry was one of them.
At a briefing in his office on Monday, Mr. Enalemah said the names of the other 26 industries would soon be released to the public.
Under the reviewed provisions guiding the incentive, the minister said all industries removed from the list of beneficiaries would take effect within three years.
He explained that the review was necessary to bring the list of pioneer industries and products in line with the country’s current economic realities captured under the National Economic Recovery and Growth Plan, ERGP, of the federal government.
“The Federal Government is committed to encouraging and attracting investments into critical sectors of the economy, to significantly impact development and deliver key benefits to the country,” he said.
“These benefits include economic growth and diversification, industrial and sectoral development, employment, skills and technology transfer, export development and import substitution,” he added.
Also, the Executive Secretary, NIPC, Yewande Sadiku, said the reforms by the government have further brought clarity, predictability and process efficiency to the PSI regime.
“We will continue with the reform process as we plan to take the PSI application process online. We will also engage with relevant stakeholders with a view to updating the existing legislations,” she said.
Pioneer status is a tax holiday granted by government to companies interested in investing in difficult sectors of the economy with the understanding that profits from their operations would be ploughed back to the business, to create jobs and boost the growth of the economy.
The pioneer incentive scheme is governed by the Industrial Development Income Tax Relief Act to allow tax holidays to be granted industries not necessarily engaging in pioneering activities, but considered by government not mature and requiring support to grow.
Under the current arrangement, pioneer status grants a beneficiary company an initial three years tax holiday, subject to additional one, or maximum two years renewal, making a total five years.
However, in September 2015, the government had imposed an administrative suspension on further processing of PSI applications, to allow for a comprehensive review and reform of the incentive regime.
The government has said the reform was necessary to help increase transparency and process efficiency, better articulate the expected economic benefits, and improve its ability to measure the impact of the incentive.
Under the new application guidelines, information on the considerations for assessing new PSI and extension applications would be provided online.
Besides, the guidelines further outlines the application processes and timelines as well as the obligations of beneficiaries.
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.
Conditions for an industry or product to be designated with a pioneer status include if it was not being carried on in Nigeria on a scale suitable to the economic requirements of the country or not at all.
Either where there are favourable prospects for further development, or if it was expedient, in the public interest, to encourage the development and establishment of the industry in Nigeria.
The Nigeria LNG has been one company in the country that was granted pioneer status when it commenced business in 1989, to enable it venture into the business of harnessing Nigeria’s abundant natural gas resources for exports.