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Nigeria Corporate - Tax credits and incentives

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Nigeria has various tax incentives intended to encourage investment in key sectors of the economy, as follows.

Tax holidays

Pioneer companies investing in specified industrial activities may, on application, be granted a tax holiday for three years initially, which may be extended for up to two years upon satisfaction of specified conditions. Examples of economic activities that may be granted a tax holiday include glass and glassware manufacturing, manufacturing of fertilisers, and steel manufacturing.

A new company that engages in the mining of solid minerals is exempt from tax for the first three years of its operation.

Rural location incentives

Certain incentives are available to companies located in rural areas. The incentives take the form of tax reductions at graduated rates for enterprises located at least 20 kilometres from available electricity, water, and tarred roads.

Export incentives

Export processing zones (EPZs) and free trade zones (FTZs) are locations within Nigeria designated by the government as free areas where export trade activities can be carried on free of tax and foreign exchange restrictions.

A company that is engaged in an approved manufacturing activity in an EPZ and incurs expenditures in its qualifying building and plant equipment is entitled to 100% capital allowance in that year of assessment.

In addition, a company that is 100% export oriented but located outside an EPZ will enjoy a three year tax holiday, provided the company is not formed by splitting up or reconstruction of an already existing business and the export proceeds form at least 75% of its turnover.

Profits of companies whose supplies are exclusively inputs to the manufacture of products for export are exempt from tax. Such companies are expected to obtain a certificate of purchase of the input from the exporter in order to claim tax exemption.

Where plant and machinery are transferred to a new company, the tax written down value of the asset transferred must not exceed 25% of the total value of plant and machinery in the new company. The company should also repatriate at least 75% of the export earnings to Nigeria and place it in a Nigerian domiciliary account in order to qualify for a tax holiday.

Profits of any Nigerian company in respect of goods exported from Nigeria are exempt from tax, provided that the proceeds from such exports are repatriated to Nigeria and are used exclusively for the purchase of raw materials, plant, equipment, and spare parts.

In order to streamline the administration of permissible taxes within the tax free zones, the Oil and Gas Free Zone Authority (OGFZA) has established the Free Zones Tax Administration (FZTA) Unit with effect from January 2015. Going forward, all tax matters relating to the free zones will be coordinated by the FZTA.

Export Expansion Grant (EEG) Scheme

The EEG Scheme grants the Export Credit Certificate (ECC) as an incentive that can be used to settle all federal government taxes, such as VAT, WHT, CIT, etc. It can also be used to purchase government bonds and repay government credit facilities and debts due to the Assets Management Company of Nigeria (AMCON).

To encourage export of value added and processed/manufactured products, exporters are divided into four categories with maximum applicable EEG rates as indicated below:

  • Fully manufactured products: 15%.
  • Semi-manufactured products: 10%.
  • Processed/intermediate products: 7.5%.
  • Merchants/primary agricultural commodities: 5%.

Gas utilisation incentives

Companies engaged in gas utilisation are entitled to:

  • A tax-free period for up to five years.
  • Accelerated capital allowance after the tax-free period.
  • Tax-free dividends during the tax-free period.

Tourism incentives

25% of the income derived from tourism by hotels in convertible currencies is exempt from tax if such income is put in a reserve fund to be utilised within five years for expansion or construction of new hotels and other facilities for tourism development.

Interest incentives

Interest accruing on deposit accounts of a non-resident company is tax-exempt, provided the deposits are made by transfer of funds to Nigeria on or after 1 January 1990 and the depositor does not become non-resident after making the deposit while in Nigeria.

Interest on foreign-currency domiciliary accounts is also tax-exempt.

Interest on any foreign loans, and interest on any loan granted by a bank for the purpose of manufacturing goods for export, is exempt from tax as follows:

Repayment period Moratorium Exemption (%)
Over 7 years Not less than 2 years 100
5 to 7 years Not less than 1.5 years 70
2 to 4 years Not less than 1 year 40

Interest on any loan granted by a bank to a company engaged in agricultural trade, fabrication of local plant and machinery, or as working capital to any cottage industry is 100% tax free if the loan has a moratorium of not less than 18 months and the rate of interest is not more than the base lending rate.

Investment allowances

An investment allowance of 10% on the cost of qualifying expenditures in respect of plant and machinery is available as a deduction from assessable profits in the year of purchase. There is no restriction to the full claim of capital allowance in any year of assessment for companies in the mining, manufacturing, and agricultural sectors.

Foreign tax credit

Nigeria does not grant automatic tax credits to Nigerian companies for foreign tax on income derived from other countries. The Nigerian tax laws already provide for tax exemption for dividends, interest, and royalties.

Foreign tax credits are only granted based on the provisions of existing DTTs and partial credits as applicable to Commonwealth countries. In this regard, full tax credits are usually provided for in the DTTs. Tax credits for members of Commonwealth countries are granted at up to half the Nigerian CIT rate.

Last Reviewed - 19 December 2018

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Nigeria contacts
Taiwo Oyedele Title = Taiwo Oyedele width=55px
Taiwo OyedelePartner / Head of Tax & Regulatory Services+234 1 271 1700 ext. 50002
Russell Eastaugh Title = Russell Eastaugh width=55px
Russell EastaughPartner / Director General Tax Services+234 1 271 1700 ext. 50001
Emuesiri Agbeyi Title = Emuesiri Agbeyi width=55px
Emuesiri AgbeyiPartner / Director Tax and Private Wealth Services+234 1 271 1700 ext. 50006
Kenneth Erikume Title = Kenneth Erikume width=55px
Kenneth ErikumePartner / Director Tax Reporting & Strategy+234 1 271 1700 ext. 50004
Moshood Olajide Title = Moshood Olajide width=55px
Moshood OlajidePartner / Director Tax, Regulatory Compliance, and Advisory+234 1 271 1700 ext. 50005
Seun Adu Title = Seun Adu width=55px
Seun AduPartner / Director Tax and Transfer Pricing+234 1 271 1700 ext. 52001
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