finance act 2021

Tax Incentives and Investment Opportunities in Nigeria Finance Act 2021

 

Introduction

 

The Nigeria Finance Act 2021 introduced a range of tax incentives and investment opportunities to stimulate economic growth and attract both domestic and foreign investments. As a leading accounting firm in Nigeria, we recognize the significance of these amendments in fostering a favorable business environment. In this article, we will explore the key tax incentives and investment opportunities presented by the Finance Act 2021, shedding light on how businesses can leverage them for sustainable growth.

 

  1. Pioneer Status Incentive

 

The Finance Act 2021 retained and enhanced the Pioneer Status Incentive (PSI) to encourage investments in certain industries designated as “pioneer industries.” Businesses operating in these pioneer industries can enjoy a tax holiday for a specified period. The Act now allows pioneer status to be granted for up to 5 years, renewable for an additional 3 years, providing investors with a total of 8 years of tax exemption. This incentive aims to attract investments to critical sectors and stimulate innovation and technological advancements.

 

  1. Special Economic Zones (SEZs)

 

The Finance Act 2021 introduced tax incentives for businesses operating within Special Economic Zones (SEZs). These zones, established by the Nigerian government, offer specific advantages such as tax exemptions, duty-free imports, and streamlined regulatory processes. Businesses operating within SEZs can benefit from reduced tax rates and other concessions, making these areas highly attractive for both local and foreign investors looking to expand their operations.

 

  1. Tax Relief for Infrastructure Development

 

Recognizing the importance of infrastructure development for economic growth, the Finance Act 2021 provides tax relief for companies involved in infrastructure projects. Businesses engaged in roads, bridges, railways, and other qualifying infrastructure projects can enjoy tax deductions for the costs incurred during the project’s implementation. This incentive not only encourages investment in critical infrastructure but also contributes to the overall development of the country.

 

  1. Incentives for Agriculture and Agro-Allied Businesses

 

The Finance Act 2021 offers tax incentives to businesses operating in the agricultural sector to promote food security and agro-allied industries. Tax holidays and other favorable tax treatments are provided to businesses involved in primary agricultural production, agro-processing, and agricultural equipment manufacturing. These incentives aim to boost productivity in the agricultural sector and attract more private investments into this crucial area of the Nigerian economy.

 

  1. Extension of Capital Allowance for Assets

 

To encourage capital investment and modernization of businesses, the Finance Act 2021 extended the capital allowance period for qualifying assets. Businesses can now claim capital allowances on qualifying plant and machinery, industrial buildings, and agricultural facilities over an extended period, promoting technological advancement and efficiency in various industries.

 

  1. Export Expansion Grant (EEG)

 

The Finance Act 2021 reinstated the Export Expansion Grant (EEG) scheme, which aims to promote non-oil exports by providing exporters with incentives. Under this scheme, exporters can access grants based on their incremental export volumes. This incentive encourages businesses to diversify their revenue streams by tapping into international markets and contributes to Nigeria’s foreign exchange earnings.

 

Conclusion

 

The Nigeria Finance Act 2021 has introduced a range of tax incentives and investment opportunities to foster economic growth and attract investors. By leveraging these incentives, businesses can strategically position themselves for long-term success while contributing to the development of key sectors in Nigeria’s economy.

 

As a reputable accounting firm, we advise businesses to thoroughly understand these incentives and opportunities and align them with their growth and investment plans. Seeking professional advice can ensure proper compliance with the tax regulations and enable businesses to maximize the benefits available under the Finance Act 2021.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.

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