In an earlier article titled ‘Governmental Policies that Boost Your Business: Tax Incentives and Grants’ our focus was on Pioneer Status Incentive (PSI) and Capital Gains Tax Exemptions, incentives provided by the Nigerian government.
The primary agency responsible for promoting and coordinating investments in Nigeria is The NIPC (Nigerian Investment Promotion Commission) . Its mandate is to attract investments, provide investor support services, and facilitate a conducive business environment. The NIPC serves as a one-stop investment center, offering guidance, information, and assistance to both local and foreign investors.
In this article we would exploring the Investment Tax Credit, and Export Expansion Grant (EEG)
Investment Tax Credit Policies
Is a tax incentive provided by the government to encourage companies to invest in new plant and machinery for their operations. The Investment Tax Credit aims to stimulate capital investment, boost productivity, and drive economic growth. Here are some key points to understand about the Nigerian Investment Tax Credit:
Purpose and Benefits: The Investment Tax Credit is designed to reduce the tax liability of companies that make qualifying investments in new plant and machinery. It provides a credit against the company’s income tax liability, thereby lowering the overall tax burden and freeing up capital for further investment or operational expansion.
Qualifying Expenditures: The Investment Tax Credit applies to qualifying expenditures incurred by companies on the acquisition, installation, and construction of new plant and machinery for business purposes. The eligible investments must be directly used in the production of goods or services and contribute to enhancing the company’s operational capacity.
Credit Amount: The Investment Tax Credit provides a credit of 10% of the qualifying investment expenditure. This means that companies can deduct 10% of the eligible investment amount from their income tax liability. For example, if a company incurs qualifying expenditures of ₦100 million, it can claim a tax credit of ₦10 million.
Carry-Forward and Utilization: If the Investment Tax Credit exceeds the company’s income tax liability in a particular year, the excess credit can be carried forward to subsequent years. The unused credit can be offset against future income tax liabilities until fully utilized, subject to a specific timeframe as determined by tax regulations.
Compliance Requirements: To claim the Investment Tax Credit, companies must comply with certain requirements. This includes maintaining proper records and documentation of the qualifying investment expenditures, which may include invoices, receipts, and relevant supporting documents. Additionally, companies must meet all other tax compliance obligations and submit accurate and timely tax returns.
Application and Reporting: Companies do not need to apply separately for the Investment Tax Credit. Instead, they can claim the credit in their annual income tax returns by providing the necessary details of the qualifying investment expenditures and calculating the credit amount based on the prescribed rate.
It is essential for businesses to consult with tax professionals or seek guidance from the relevant tax authorities, such as the Federal Inland Revenue Service (FIRS), to ensure compliance with the specific rules and requirements for claiming the Investment Tax Credit. Staying updated with the latest tax regulations and guidelines is crucial to accurately assess eligibility and maximize the benefits of this tax incentive.
The Nigerian Export Expansion Grant (EEG)
The Nigerian Export Expansion Grant (EEG) is a government program that offers cash incentives to qualified exporters in order to encourage non-oil exports. The EEG provides grants to exporters that can be used to defray some of the expenses related to exporting products or services. The Nigerian Export Expansion Grant is a beneficial incentive for non-oil exporters that supports economic diversification, encourages their involvement in international commerce, and advances the expansion and improvement of the Nigerian economy.
Here are some key points to understand about the Nigerian Export Expansion Grant:
Purpose and Objectives: The EEG is designed to encourage and support non-oil exporters in Nigeria. Its primary objective is to enhance the competitiveness of Nigerian products in international markets, diversify the country’s export base, and stimulate economic growth.
Grant Calculation: The EEG grant is calculated as a percentage of the value of the exported goods or services. The percentage varies depending on the product, market, and export destination. The grant rates are determined by the Nigerian Export Promotion Council (NEPC) and are subject to periodic review and adjustments.
Grant Utilization: Exporters can utilize the EEG grant to offset certain eligible expenses related to their export activities. These expenses may include costs incurred for packaging, branding, product development, market research, trade fairs and exhibitions, and transportation. The grant can help reduce the financial burden on exporters and improve their competitiveness in international markets.
Eligibility: To be eligible for the EEG, exporters must meet certain criteria. These criteria include being registered with the NEPC, having a valid export registration certificate, and fulfilling specific export performance requirements. The NEPC sets guidelines and criteria for eligibility, which exporters should carefully review and adhere to.
Application Process: Exporters interested in accessing the EEG grants need to apply to the NEPC. The application process typically involves submitting relevant documents, such as export invoices, shipping documents, and export performance reports. The NEPC evaluates the applications and determines the grant amount based on the eligible export value.
Compliance and Reporting: EEG beneficiaries are required to comply with certain reporting obligations. This includes providing regular export performance reports and other relevant information as specified by the NEPC. Compliance with these reporting requirements is essential to maintain eligibility for future EEG grants.
It is important for exporters to stay updated with the guidelines and regulations issued by the NEPC regarding the EEG. The NEPC provides detailed information on eligibility requirements, application procedures, grant rates, and reporting obligations. Engaging with the NEPC and seeking professional advice can help exporters navigate the process and maximize the benefits of the EEG.
In conclusion, government incentives play a vital role in boosting businesses and stimulating economic growth. In Nigeria, various governmental policies and programs provide tax incentives, grants, and support services to create a favorable business environment. These incentives encourage investment, enhance competitiveness, and drive innovation across different sectors. By leveraging these incentives and engaging with the government, businesses can thrive, create jobs, and drive sustainable development.
