Nigeria’s growing economy and favorable investment climate have attracted foreign investors seeking lucrative opportunities in various sectors. To further encourage foreign direct investment and boost economic growth, the Nigerian government introduced the Finance Act 2019, which includes several tax incentives for foreign investors. These incentives are designed to make Nigeria an even more attractive investment destination. In this article, we provide a comprehensive guide to the tax incentives available to foreign investors under the Finance Act 2019.
1. Pioneer Status Incentives:
The Finance Act 2019 grants foreign investors the opportunity to apply for the Pioneer Status Incentive, which offers tax holidays and other benefits to companies engaged in specific industries. If approved, a company can enjoy a corporate income tax holiday for an initial period of three years, renewable for an additional two years. This incentive is particularly beneficial for businesses in sectors that the Nigerian government considers critical for economic development.
2. Capital Allowances and Investment Deductions:
Foreign investors in Nigeria can benefit from enhanced capital allowances and investment deductions under the Finance Act 2019. The Act allows for a 10% investment deduction on qualifying plant and machinery for companies engaged in qualifying activities. This provision encourages foreign investors to modernize and expand their operations, leading to increased productivity and growth.
3. Tax Exemptions for Infrastructure Development:
Infrastructure development is a key priority for Nigeria’s economic progress. To encourage foreign investment in this area, the Finance Act 2019 provides tax exemptions for companies involved in building and maintaining critical infrastructure projects. These exemptions are aimed at attracting foreign investors to participate in infrastructure development and contribute to the country’s economic advancement.
4. Research and Development (R&D) Tax Credit:
The Finance Act 2019 introduces a Research and Development (R&D) tax credit for companies engaged in qualifying R&D activities. Foreign investors undertaking innovative projects and research initiatives can claim a tax credit of 20% on qualifying R&D expenses. This incentive fosters technological advancement and incentivizes foreign investors to invest in cutting-edge research in Nigeria.
5. Export Processing Zone (EPZ) Benefits:
Foreign investors operating within Export Processing Zones (EPZs) are eligible for attractive tax incentives under the Finance Act 2019. These incentives include a tax holiday for an initial period of three years, renewable for an additional two years, subject to meeting certain conditions. EPZs provide foreign investors with a favorable environment for export-oriented industries and attract foreign direct investment to the country.
6. Avoidance of Double Taxation:
The Finance Act 2019 includes provisions to avoid double taxation for foreign investors. Nigeria has entered into double taxation agreements with several countries to prevent investors from being taxed twice on the same income in both their home country and Nigeria. This ensures that foreign investors can repatriate profits without facing excessive tax burdens.
The tax incentives introduced by the Finance Act 2019 demonstrate Nigeria’s commitment to fostering a business-friendly environment for foreign investors. These incentives, ranging from tax holidays to investment deductions and exemptions, provide attractive opportunities for foreign companies looking to invest in Nigeria.
By taking advantage of the tax incentives under the Finance Act 2019, foreign investors can contribute to Nigeria’s economic growth, create employment opportunities, and forge lasting partnerships that drive the country’s development and prosperity.
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