HOW TO GET A PIONEER STATUS TAX RELIEF IN NIGERIA

As a way to encourage industrial and economic growth, the federal government of Nigeria launched the Pioneer Status Incentive (PSI) relief under the Industrial Development (Income Tax Relief) Act No 22 of 1971 (“IDA”). This incentive is for both indigenous and foreign companies to enjoy a tax holiday from payment of company income tax for an initial period of 3 years, subject to renewal for an additional period of two years. The aim is to encourage investment in industries where the activities carried on are considered to be essential for economic growth. In light of this, this article provides essential details regarding the Pioneer Status Tax Relief and the procedure for obtaining same.

Which Agency issues the Pioneer Status Incentive in Nigeria?

The Nigeria Investment Promotion Commission (NIPC) is responsible for issuing the Pioneer Status Incentive to suitably qualified applicants. It is issued upon due assessment and inspection of the application and the facility of the applicant.

What are the benefits of obtaining a Pioneer Status Tax Relief?

1. Income Tax Relief: Enjoy a 100% tax holiday for an initial period of 3 years, extendable for an additional 2 years up to a total of 5 years.
2. Improved Liquidity: The resulting tax savings can be redirected toward business operations, expansion initiatives, or product innovation.
3. Strengthened Market Competitiveness: Lower tax obligations enable more flexible pricing strategies and improved profit margins.
4. Reputation Enhancement: Official recognition by the Nigerian Investment Promotion Commission enhances credibility with financial institutions, investors, and strategic partners.
5. Additional Industry-Specific Incentives: Eligible sectors may also benefit from import duty exemptions, infrastructure support, and localized incentives.

What industry or product qualifies for a pioneer status in Nigeria?

An industry or product is designated as a pioneer if:

1. It is not being carried on in Nigeria on a scale suitable to the economic requirements of Nigeria or at all, or there are favourable prospects of further development in Nigeria; or
2. It is expedient in the public interest to encourage the development or establishment of such industry in Nigeria. The pioneer designation is conferred by the inclusion of the industry or product on a list approved by the Federal Executive Council.

What are the Qualifications for the Grant of Pioneer Status Tax Relief?

To be eligible for the issuance of a certificate of Pioneer Status Incentive, the company must have the following:

1. An applicant must make a new application in the first year of production/service and must apply for an extension no later than one month after the expiration of the initial tax relief period of three years or an extension of one year.
2. An applicant must be engaged in an activity listed as a pioneer industry or pioneer product.
3. It must have a non-current tangible asset of over one hundred million naira (N100 million)
4. An applicant must provide evidence of all required legal and regulatory compliance documentation.
5. An applicant must demonstrate the tangible impact its activity (project) will have on Nigeria’s economic diversity and growth, industrial and sectoral development, employment, skills and technology transfer, export development, and import substitution.
6. An applicant must make full payment of fees promptly, when due.
7. During the pioneer period, a performance report must be submitted to NIPC annually for monitoring and evaluation purposes.
8. Its capital expenditure must not be below N10,000,000 (Ten million naira)

Who can apply for Pioneer Status Tax Relief?

Pioneer status is not reserved solely for large corporations or foreign investors. Nigerian-owned startups, small and medium-scale enterprises, as well as locally incorporated companies with appropriate structures and verifiable production activities, are equally qualified to apply. Significantly, sectors such as agriculture, agro-processing, renewable energy, solid minerals, and digital innovation, largely driven by indigenous enterprises, remain open for incentive-based support and investment opportunities.

What is the procedure for obtaining Pioneer Status Tax Relief?

This process is divided into two stages; the first stage takes approximately 18 weeks, while the second stage takes 7 weeks.

Step 1: Write to NIPC

Fill out the NIPC form and presentation format. Request the date of the presentation of the project.

Step 2: Project presentation

After submission, you will be required to make a formal project presentation to NIPC. This covers company overview, project description, production/service process, market/sector analysis, objectives, employment/skills/technology transfer plan, local-content/import-substitution/export strategy.

Step 3: Make payment for the application and due diligence fee to NIPC

NIPC will conduct due diligence visits to the project site, inspect the capital investment, verify documents, and check compliance with conditions.

Step 4: Submission of application

Submit the completed form documents to the Executive Secretary of NIPC and pay the required application fee.

Step 5: Due diligence

Here, the NIPC reviews the application as well as conducts due diligence and checks.

Step 6: Decision of the NIPC

The NIPC decides on the application and notifies the company of its decision.

Step 7: Make payment of service charge deposit to NIPC

Step 8: Issuance of AIP

After payment, the NIPC issues the applicant with Approval – In- Principle. The same is sent to the Industry Inspectorate Department (IID), FIRS, and State Ministries

Step 9: Apply for the Production Day certificate, which is to be issued by the IID

Step 10: Production Day determination

The IID reviews the application at this stage and schedules a day to visit the project

Step 11: Production Day Certificate

Upon satisfaction with the application and inspection, the IID will issue the Production Day Certificate and send a duplicate to the NIPC

Step 12: Issuance of Pioneer Certificate

If the application is approved, NIPC will issue a Pioneer Certificate specifying the industry/product, the commencement date, and the period of tax relief granted.

Conclusion

Obtaining a Pioneer Status Incentive (PSI) in Nigeria is a strategic pathway for businesses seeking to strengthen their financial position and promote sustainable growth. While the process requires careful preparation, documentation, and strict compliance with NIPC guidelines, the benefits, including up to 5 years of corporate income tax exemption, make it a worthwhile pursuit for eligible companies. By ensuring early application, maintaining transparent financial records, and demonstrating measurable economic impact through job creation, innovation, and local content development, companies can position themselves to successfully secure the incentive. Ultimately, the PSI not only rewards forward-thinking investors but also contributes to Nigeria’s broader goal of industrialization and economic diversification.

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