Agricultural Incentive

Introduction Agriculture plays a vital role in Nigeria’s economy, contributing significantly to employment, food security, and export earnings. Recognizing the importance of promoting the agricultural sector, the Nigeria Finance Act of 2021 introduced various tax incentives to support agriculture and agribusiness. As a leading accounting firm in Nigeria, we aim to shed light on these incentives and their potential impact on the growth and development of the agricultural sector. In this article, we will explore the key tax incentives for agriculture and agribusiness outlined in the Nigeria Finance Act 2021. The Nigeria Finance Act 2021 extends the Pioneer Status Incentive to agribusinesses engaged in qualifying activities. Agribusinesses designated as pioneer industries are eligible for a tax holiday for an initial period of three years, with the possibility of an additional two-year extension. This incentive provides new and existing agribusinesses with the opportunity to invest in modern technologies, expand production capacity, and explore innovative practices without incurring corporate income tax during the tax holiday period. To encourage agricultural exports, the Act re-introduced the Export Expansion Grant (EEG) scheme. The EEG provides export-oriented agribusinesses with a grant equivalent to a percentage of the value of their exports. This grant aims to offset certain export-related expenses and enhance the competitiveness of Nigerian agricultural products in international markets. Agribusinesses involved in exporting agricultural products can leverage the EEG to expand their global reach and boost revenue. The Finance Act 2021 allows agribusinesses to deduct reasonable farm management expenses incurred in the production of agricultural products from their assessable profits. This provision includes expenses related to farm planning, soil testing, pest control, and livestock management, among others. The deductibility of these expenses reduces the tax burden on agribusinesses and incentivizes investment in modern agricultural practices. The Act introduces an Investment Tax Credit (ITC) for agribusinesses investing in qualifying agricultural projects. Agribusinesses can claim a tax credit equivalent to a percentage of the qualifying investment made in specified agricultural activities. The ITC serves as an additional incentive to encourage investment in critical areas of the agricultural value chain, such as processing, storage, and value-added activities. The Nigeria Finance Act 2021 facilitates access to the Agricultural Development Fund for agribusinesses through a tax-deductible contribution mechanism. Agribusinesses can claim a deduction for contributions made to the Fund, thereby increasing their working capital for agricultural activities and projects. The availability of the Fund encourages agribusinesses to access affordable financing and invest in modern technologies and infrastructure. Conclusion The tax incentives for agriculture and agribusiness in the Nigeria Finance Act 2021 demonstrate the government’s commitment to fostering a vibrant and sustainable agricultural sector. By offering tax holidays, export expansion grants, deductibility of farm management expenses, investment tax credits, and access to agricultural development funds, the Act encourages investment, modernization, and increased productivity in the agricultural value chain. As a reputable accounting firm in Nigeria, we stand ready to assist agribusinesses in understanding and leveraging these incentives for growth and success. Our expertise in tax planning and compliance ensures that agribusinesses optimize the available tax incentives while navigating the regulatory landscape. With the implementation of these tax incentives, Nigeria’s agricultural sector is poised for greater expansion, increased productivity, and enhanced global competitiveness. Together, let us work towards building a resilient and prosperous agricultural sector that contributes to Nigeria’s economic growth and food security. 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