These Businesses Are Currently Free From Tax In Nigeria


You can’t consider the heavy job of having to fulfill numerous tax and levy obligations within the first year of being in business, at the same time struggling to raise more capital or manage the fast depleting funds within your disposal. Nigerian government has a lot of tax incentives, one of which is the incentive of Pioneer Status to help you reduce the burden of the first few years of being in business. The incentive of Pioneer Status is a tax strategy used by government across the world to encourage investments in industries that were either non-existent at all, or the country did not have sufficient presence for its economic development.

The Nigerian federal government has expanded the range of industries that would benefit from the Pioneer Status tax incentive under the Nigerian Industrial Revolution Plan, NIRP, and the Economic Recovery and Growth Plan, ERGP, by promoting the 27 industries and products in the approved status document.


The pioneer status applies to companies or startups in their first year of business or operations. Consequently, companies or businesses older than a year would not benefit from the pioneer status incentive. Again, businesses that have existed for several years in a particular sector may not enjoy the pioneer status, except such companies or startups branch into a new line of business covered under the list of 27 or more new industries and products.

Clearly, established companies such as Payporte, Konga or Jumia who are already leaders in the e-commerce business sector as well as those in the music industry would not enjoy tax exemption by the government under the new regime.

The Industries Covered By The Regime Include:

Agriculture:

Startups or new businesses under Nigerian agricultural sector, who are within the first one year of their business can get tax break for a period of three years or more. The areas covered under the agricultural sector include:

  • Processing and preservation of meat and poultry
  • Production of meat/poultry products
  • Processing of cocoa
  • Marine and Freshwater fishing and aquaculture.
  • Growing of all crops.

Manufacturing:

This is where Nigeria hopes to diversify its oil-dependent economy to. Areas covered under the manufacturing sector include:

  • Manufacture of starches and starch products
  • Manufacture of animal feeds
  • Tanning and dressing of leather
  • Manufacture of leather footwear, luggage and handbags
  • Manufacture of household and personal hygiene paper products, like tissue papers etc.
  • Manufacture of paints, vanishes and printing ink.
  • Manufacture of plastic products (builders’ plastic ware) and moulds
  • Manufacture of batteries and accumulators
  • Manufacture of steam generators
  • Manufacture of railway locomotives, wagons and rolling stock
  • Manufacture of metal-forming machinery and machine tools
  • Manufacture of machinery for metallurgy
  • Manufacture of machinery for food and beverage processing
  • Manufacture of machinery for textile, apparel and leather production;
  • Manufacture of machinery for paper paperboard production.
  • Manufacture of plastics and rubber machinery

Information Technology And Communication:

  • E-commerce services
  • Software development and publishing
  • Publishing of Books.
  • Telecommunication apart from GSM telecommunication

Entertainment:

  • Motion picture, video and television programme production, distribution, exhibition and photography;
  • Music production, publishing and distribution, such as Record Labels etc.

Environment:

Waste treatment, disposal and material recovery, such as recycling.

Also check: Practical Guides On How You Can Register A Business Name In Nigeria Yourself

Real Estate:

  • Real estate investment vehicles under the Investments and Securities Act, such as Real Estate Investment Trusts,REICs etc.
  • Construction and operation of non-residential buildings (Shopping malls, hotels;Office buildings; building for industrial production;warehouses; low and middle-income housing estates of single and multi-family buildings,etc)

Business :

  • Business Process Outsourcing 

Securities: 

  • Mortgage backed securities under the Investments and Securities Act

Mining:

  • Mining and processing of coal

Construction:

  • Construction and operation of water projects
  • Construction and operation of roads, railways and airports
  • Electric power generation,transmission and distribution, among other.
  • Construction of utilities generally.

Steps To Take To Obtain Pioneer Status Certification:

  1. Make sure you apply within the first one year of doing business and that you fall within the categories described above.
  2. Get your documents ready. Documents in this case include financial statements, certificate of incorporation and other incorporation forms, project documents such as Land Documents, Building drawings, Construction agreements, trademark certificate, title documents and invoices of assets of the company, Tax Identification Number, Tax Clearance Certificate, Bill of quantities and any other document pertaining to your projects.
  3.  Choose a date to make presentation to the Nigerian Investment Promotion Commission about your project. Furnish the Commission about your company as well as your financial statements.
  4. Once presentation of your project has been made to the Commission, and NIPC is satisfied, you would then be requested to make payment of the application and due diligence fees. Make payment to the Commission.
  5. At this stage, you would now make application to the Commission, attaching both the soft and hard copies of the relevant supporting documents. NIPC will review your application and conduct intense legal and compliance checks on your project, after which it fixes a date for a verification visit to your facility.
  6. At this stage, once the NIPC declares your application successful, you will then be requested to make payment of the service charge. NIPC, thereafter, issues you with an Approval In Principle (AIP) once payment has been made, which you may collect in person, or have sent to you by courier. A copy of the AIP is forwarded by the Commission to the tax office and the Industrial Inspectorate Division.
  7. The next stage is to complete an application form for Production Day Certificate (PDC) and submit same to the Industrial Inspectorate Division (IID) under the Federal Ministry of Trade and Investment alongside the soft and the hard copies of the necessary documents. IID will review the application and schedule an inspection visit to the site of the project for the purpose of determining the production day of the project.
  8. Satisfied, the IID will send you a mail to that effect,as well as a copy of the Production Day Certificate, at the same time notifying the NIPC.
  9. Once notified, the NIPC will issue you a Pioneer Status Incentive Certificate and send copies of the PSI Certificate to both the tax office (FIRS) and the IID 
  10. The whole process takes a minimum period of 25 weeks (approximately 6 months) to be completed.
  11. You may however get yourself a tax consultant or a lawyer who does the work for you while you run your business.
Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.

Best Ways To Carry Out Market Research As A Startup

Without aggressive research and market survey efforts before starting your business, you may be wading through unclear waters. Jeff Bezos’ confidence in succeeding came from a little research on internet business possibilities at D.E Shaw & Co. The research showed that web usage was growing at a staggering rate of 2,300 percent a year, as result of the growing availability of Internet browsers then.

According to Jeff, something that is growing 2,300 percent a year ‘is invisible today and ubiquitous tomorrow.’ He was further surprised that of all products that could be sold on the Web (including computer softwares, office supplies, clothing and apparel, music, among other 20 possibilities), books moved from being the bottom of the list to the very top, with music following in second place. Books stayed because of their wide availability, logistics and a host of other factors. Without such research, Amazon.com would not have found its mission, and would probably have been strangulated by stiff competitions in the long-run. It was able to innovate because it knew all along where it was going to. Here are a few things to note about the best ways to carry your market research as a startup.

Research Your Industry and Obtain Key Market data

  • Choose your specific industry, mining, sales, retailing, ecommerce
  • Carry out extensive market research yourself or through a professional. Sometimes, the use of trained professional researchers is recommended since they are often skilled and know all the techniques of research that would adequately cover all the fields of your research. They can also explain the collated data to you, in ways that are both dispassionate and objective.
  • Deplore the Internet Use the Internet to search for already collated data in your industry within your locality. You may consider using the following tricks. Enter words on search engines, such as, “X market size pdf”; “X market outlook pdf”; or “X market trends pdf”. Using ‘pdf’ allows you to gain useful industry knowledge, insights and reports. This may be useful but most times may not remotely represent your needs.

Research And Study Your Market Segments, Customers or Clients Purchasing Patterns or Psychology.

  • At this stage, you are a bit closer to what you are looking for. Industries target this method because most times, it accurately captures their interests.
  • This would also help you gain clearer insights about the purchasing pattern of your customers.
  • There are so many research firms that may help you do this more precisely. Where you can’t afford any, you can resort to already published reports online.
  • Research companies such NPD Group or Nielsen sometimes publishes periodic survey data online.
  • To research online, simply type in keywords like “survey”, year “2018”, “pdf”, customer info “small business owners”.
Research About  Your Competitors
  • There persons or companies that are already in business like you. Most of them have assumed comfortable market shares.
  • Turning blind eyes to your competitors could be very deadly because they would often give you a clearer view about the nature of the market you are going into, the concentration of competitors in your locality and the type of services or products they produce.
  • Here, you need to find more about your competitors’ market share, including their marketing and pricing strategies.
  • The best and the easiest ways to do so would be research online.
  • You can Google your competitors online. Try using keywords such as: market shares, market players, market leaders, industry leaders, market share, revenue statistics, loss statistics, why company x succeeds more company x vs company x.
  • You may obtain data from the Stock Exchange or any trading point, especially if the company is a public company because it has much of its data in the public domain.
  • To find more information about the revenue of companies on Google, you can use Yahoo Finance or other platforms especially if the company is a public company. Use the Company’s symbol or logo to conduct the search.
  • Where the company is not a public company but a big one, you can Go to Google and search for “Company X revenues”, “Company X annual revenue”. Or search for “X market companies’ revenue streams”.
  • For medium or small sized business, you may use Hoovers. However, you can use this name if you know the real name of the companies. You can find the registered names at the foot of their companies’ websites, if they have.  Companies usually go by such names as XYZ LLC , or XYY LTD. When this is not possible, you can try and find out who owns the website. You can proceed with Hoovers after you have obtained the name.
Research about Competitor Market Share
  • You can calculate market shares if you find top 100 companies on this market and its revenues. Most times, information about market shares is not always available or satisfactory.
Related: 5 Best Ways Any Startup Can Use To Attract Investors
Competitor Pricing Research
  • Information about pricing can always be found on the companies’ website.
  • You can try out on a few consumer websites where they are not available. Consumer websites such as https://www.toptenreviews.com/ include pricing for each product they compare. For software company pricing use https://www.capterra.com.
  • You may also rely on groups or the social media to solicit for different pricing from consumers in your industry.
Competitor Marketing Strategy Research
  • You can find information on case studies and articles in the media as sometimes founders share their marketing secrets.
  • You can also collate data by attending events or shareholders’ meeting of competitor companies and asking a few insiders.
Charles Rapulu Udoh

Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.