• Thursday, March 28, 2024
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BusinessDay

Manufacturing sector attracts most pioneer tax holiday in one year

manufacturing-sector

The incentive to encourage local manufacturing in Nigeria is evident in the tax holiday granted to the sector in the past one year.

Figures from the Nigerian Investment Promotion Commission (NIPC) show that out of the 39 companies that have been granted tax holiday since August 2017, when the suspension on tax holiday was lifted, 19 manufacturing companies have had their application for Pioneer Status Incentive (PSI) approved.

A tax holiday is a temporary reduction or elimination of a tax, and it could include income, property, sales, VAT, and other taxes.

According to the most recent data by the NIPC as analysed by BusinessDay for the period ended Q4 2018 (01 October to 31 December, 2018), four manufacturing companies were each granted tax holiday for the duration of three years. The companies include Lafarge Cement plc (UNICEM), Hayat Kimya Nigeria Limited, NFE Industries Limited, and Fidson Healthcare plc. The aforementioned companies have their operations across cement manufacturing industry, wire rods & iron bars, pharmaceutical and tissue paper.

Ayodeji Ebo, managing director, Afrinvest Securities Limited, said if the manufacturing sector is getting more tax holiday, it is consistent with the strategy of the Muhammadu Buhari administration as it is one of the agenda of the government to grow the non-oil sector.
“It is just to further support the manufacturing sector amid the high operating cost, which is in terms of infrastructure, unavailability of steady power supply, and lack of easy access to distribute their products and as such it is one of the initiatives to encourage the companies,” Ebo said.

NIPC is an agency of the Federal Government established to encourage, promote and coordinate investments in Nigeria.

On August 7, 2017, the Federal Government lifted the administrative suspension on the PSI scheme which grants companies three to five years tax holiday. While the incentive has been in place since 1971, it was suspended in 2015 by the then minister of finance, Ngozi Okonjo-Iweala, based on perceived abuse and revenue leakages.

Thus, in compliance with the requirements of the Industrial Development (Income Tax Relief) Act Cap I7, Laws of the Federation of Nigeria 2004 and the Pioneer Status (Delegation of Certain Statutory Functions) Order of 2017, NIPC has the mandate to provide details of Pioneer Status Incentive.

“Tax holiday to the sector is an incentive to the various companies who invest more heavily in the industry and also employ more labour,” Ayo Akinwunmi, head of research, FSDH Merchant Bank.

Analysis of the quarterly report by the commission revealed that in the period under review from Q4 2017 to Q4 2018, the manufacturing sector attracted the most credit holiday in Q3 2018 when seven companies’ applications for PSI were approved.

In the review quarter, companies like UVA Limited, Nosak Farm Produce Limited, Skyrun Cocoa Products Industries Limited, Aurebles Ventures Limited, Fabcom Structural Limited, and Dahua

Paper Company Nigeria Limited, which have their operations in automobile assembly, manufacture of vegetable oil, cocoa liquor, oxygen & nitrogen, long span/stone coated roofing sheet, and paper & pulp manufacturing were granted tax holidays.

A further analysis of the report by NIPC for the period under review showed that Dangote Cement plc was the only company that had a tax holiday application approved twice, although from different states – Dangote Cement plc Ibeshe 3&4 in Ogun State and Dangote Cement plc Obajana Line 4 in Kogi State, were granted PSI in Q2 2018.

This means that for the next three years, owing to when the tax holidays were received, the company will either have a reduction in its tax payment or non-payment.

A breakdown of the Q1 2018 PSI figures by NIPC revealed that despite the fact that only two companies were granted tax holidays in the review quarter, the manufacturing sector made the list of the two industries that were considered.

Data from the commission showed that First Concept and Properties Limited, a Lagos-based real estate firm which builds for rentals purposes, and Confluence Metal Fabricating Company Limited located in Kogi, a metal manufacturing firm, were approved for a three-year tax holiday.

Other sectors that have had their PSI application approved include companies from oil & gas, real estate, ICT/telecom, agric/allied, tourism, and power.

 

ENDURANCE OKAFOR