In the quest to boost local production and spur economic growth, the federal government granted eight companies pioneer tax status in the second quarter of 2021.
Out of the 28 companies that applied for the Pioneer Status Incentive (PSI) between April 1 and June 30, 2021, 28.57 percent got a nod from the federal government, as compiled from the latest report by the Nigerian Investment Promotion Commission (NIPC).
Established by the Industrial Development (Income Tax Relief) Act, No 22 of 1971, PSI is designed by the federal government to reduce the cost of doing business in Nigeria by providing corporate income tax relief to qualifying companies making investments in industries designated as ‘pioneer’.
In effect, PSI seeks to enhance the survival, profitability, and sustainability of beneficiary companies.
Read also: Company income tax in Nigeria surges 33% in Q1
According to the data by NIPC, the eight companies that were granted the three years PSI in the review quarter include Premium Aquaculture Limited, Tosett Agro Industries Limited, Aurebles Ventures Limited, Wintess Garden (Hotels and Suites) Limited, De Santiago Milan Hotel & Suite Limited, Metsa Wood Services Limited, Tiloc Nigeria Limited, and Tranos Constructing Limited.
Three of the companies that got the tax incentive in the review period are into hotel development and others are into manufacturing of gas, edible, furniture, electricals, and fish farming.
“It is to further support the sectors amid the high operating cost; infrastructure, and unavailability of steady power supply. It is one of the initiatives to encourage the companies,” a Lagos-based analyst said.
According to the data by the Abuja-based Commission, the surge in the PSI granted in the review quarter puts the current number of beneficiaries at 31 companies as of 30 June 2021. While NIPC reported no application was declined in the review quarter, analysis of its data revealed that 160 applications from different companies were recorded under the pending application status.
“The PSI is a tax holiday which grants qualifying industries and products relief from payment of corporate income tax for an initial period of three years, extendable for one or two additional years,” the Federal Ministry of Industry, Trade, and Investment said.
Pioneer Status Incentive is a tax holiday that grants qualifying industries and products relief from the payment of corporate income tax for an initial period of three years, extendable for one or two additional years.
While the incentive has been in place since 1971, it was suspended in 2015 by the then Minister of Finance, Ngozi Iweala based on perceived abuse and revenue leakages. However, the federal government in August 2017 lifted the administrative suspension on the scheme.
“Tax holiday to the companies is an incentive for them who invested heavily in various industries and also employ more labour,” Ayo Akinwunmi, Head of Research, FSDH Merchant Bank said.
Further analysis of the data by NIPC revealed that, of the eight companies, Tosett Agro Industries Limited located in Ogun State, and into the processing of edible oil had invested the most amount at N4.86 billion.
This was followed by Tiloc Nigeria Limited which has its location in Lagos State. The company which is into hotel development has invested N2.5 billion
Third on the list of companies that have invested the most amount was De Santiago Milan Hotel & Suite Limited in Lagos State. The company that is also into hotel development has injected about N1.4 billion worth of investment in the industry.
According to Madu Yusuf, the Director-General of Lagos Chamber of Commerce and Industry (LCCI), the tax incentive is granted to “sectors that strengthen Nigerian economy; in terms of growth and profitability on the investment.”
Economic activities in Africa’s largest economy grew by 0.51 percent in the first quarter of 2021, after a sluggish exit from a recession. The expansion in the review quarter marks the country’s second successive quarters of expansion after negative growth in the second and third quarters of 2020.
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