Nine tech firms get tax holiday for N159bn investments

Nine firms in the information and communication space are beneficiaries of tax exemption from the Federal Government.

These companies, which have collectively invested N159.61 billion, are beneficiaries of the Pioneer Status under the Industrial Development Income Tax Act. This was contained in the fourth-quarter Pioneer Status Incentive (PSI) report of the Nigeria Investment Promotion Commission (NIPC).

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Pioneer status is an incentive by the Federal Government that exempts companies from paying income tax for a certain period.

The tax exemption can be complete or partial, and the incentive is generally regarded as an industrial measure to stimulate economic investments. Products or companies eligible for this status are those that do not already exist in the country.

A total of 107 companies currently enjoy PSI. Thirteen got their PSI granted in Q4, 2023, five got their extension applications approved, and 20 were granted approvals-in-principle (subject to the payment of application fees and only effective after the payment of said fees). The NIPC disclosed that 211 companies, including Open Access Data Centre Limited, have pending applications for PSI status.

IT companies that have PSI status under approvals-in-principle granted include Eastcastle Infrastructure Nigeria Limited, which secured approval for three years with a total investment of N34.86 billion securing approval for three years; and O`odua Infraco Resources Limited, which got approval for three years with a total investment of N96.15 billion.

Companies that got extensions include Maindata Nigeria Limited with a total investment of N13,35 billion (two years).

IT companies that got PSI granted in Q4, 2023 include Okra Technologies Limited with an investment of N109.54 million, and approval from 2023 to 2025; Amplitude Telecoms Africa Limited with an investment of N4.8 billion and approval from 2023 to 2026; and Villextra Technologies Limited with investments of N930 million and approval from 2023 to 2026.

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Those already enjoying PSI status include Global Independent Connect Limited, which has invested N8.28 billion and whose approval expires by 2024; Ulesson Education Limited, which has invested N470.31 million and whose approval expires by 2024; and Egole Pay Limited, which has invested N650 million and whose approval expires by 2025.

Okra Technologies Limited, Amplitude Telecoms Africa Limited, and Villextra Technologies Limited are also captured as companies already enjoying PSI status.

In 2021, the government declined the applications of 10 firms, including Flutterwave. Tax incentives have become an issue of contention in the country, with experts noting that only a few firms benefit while the government suffers from poor revenues.

According to data from the Federal Inland Revenue Service’s annual reports, about 71 companies enjoyed N390.26 billion relief from pioneer status incentives between 2021 and 2022.

In 2023, the Federal Government, through Taiwo Oyedele, chairman of the Presidential Tax Reform Committee, disclosed plans to review and reduce tax waivers given to companies operating in Nigeria.

He said total tax incentives stood at N6 trillion annually. In 2023, it was estimated that at least 172 companies may not benefit from about N2.4 trillion tax waivers under the PSI and other tax exemptions if the government phased out some tax waivers.

“When you don’t look at your incentive regime, it can get to a point when it becomes a distortion for economic growth because some people benefit and others don’t. We think that what is more pressing and even more important than giving incentives is removing disincentives,” Oyedele said.

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In September 2023, the International Monetary Fund advised Nigeria and other Sub-Saharan African countries to eliminate tax exemptions and mobilise domestic revenue to reduce their fiscal deficits.