Corporate Tax Incentives: What You Need to Know

An incentive is a bullet, a key: an often-tiny object with an astonishing power to change a situation” – Steven Levitt.

Do you know when our brains are low on glucose, we are more likely to feel angry and hungry at the same time? Well, that was what I saw on the internet today and I believe it to be true because I confirmed that statement from a number of authoritative sources. Interestingly, the simplest way to restore glucose to your brain is to eat! I hope I will not turn to a foodie in the name of restoring glucose to my brain, and if I do, well, it is what it is! Welcome to Tax Thursday.

A tax incentive is a part of a nation’s assessment procedure intended to boost or empower a specific monetary movement by reducing charge installments for an organization in the said country. Among the advantages, whenever executed and planned appropriately, charge motivations can draw in speculation to a country. Different advantages of incentives include expanded business operations, higher number of capital exchanges, exploration, and innovation advancement, and furthermore improvement to less explored territories. Even though it is hard to gauge the impacts of expense motivating forces, they can, whenever done appropriately, raise the generally speaking monetary government assistance through expanding financial development and government charge income (after the termination of the duty occasion/impetus period). However, the are several tax incentives to corporate bodies and some of them include:

  1. Tax incentives to Manufacturers

Several tax incentives that have been put in place to promote manufacturing activities such as:

  • Investment Allowance

This recompense which is given notwithstanding the capital stipend (introductory and yearly) is accessible just in the primary year of acquisition of the resource and is not deductible from the expense of the resource. With the end goal of computation of capital stipend, venture allowance is given as follows:

Plant and machinery used in gas utilization activities                                                  15%,

 Plant and Machinery                                                                                                           10 %

  • Rural Investment Allowance

This allocation is to energize the area of ventures in the provincial territories, the public authority permits such organizations (i.e., those situated in the country zones) to claim the following as rural investment under the accompanying conditions:

No telephone                                                                                                                      5%

No tarred road                                                                                                                     15%

No water                                                                                                                               30%

No electricity                                                                                                                         50%

No electricity, water, tarred road, or telephone                                                            100%

  • Investment Tax Credit

This tax incentive straightforwardly affects the recipient’s assessment risk since it is deducted directly from the expense responsibility. This is expected to guarantee that the tax reduction is used in business development. The details of investment tax credit available as follows:

  Plants and machinery bought to replace obsolete ones                                                              15%

Locally manufactured plant, plant machinery and equipment                                                   15%

Capital expenditure for fabrication of tools spares etc.                                                                 25%

Research and development                                                                                                                20%

2. Tax incentives to the gas industry

The Finance Act 2020 provides for the grant of tax incentives to companies engaged in gas utilization (downstream operations). The provisions are:

  1. An initial fee tax period of three years which may, subject to the satisfactory performance of the business, be renewed for an additional period of two years.
  2. Accelerated capital allowance after the tax relief period as follows:
  3. An annual allowance of 90% with 10% rendition of investment in plant and machinery
  4. An additional investment allowance of 15% which shall not reduce the value of the asset.
  5. Tax free dividend during the tax-free period, where;
  6. The investment for the business was in foreign currency.
  7. The introduction of plant and machinery during the period was not less than 30% of the equity share capital of the company.
  8. Interest on any loan obtained with the prior permission of the minister for a gas project shall be an allowable expense.

Taxaide can ease the stress of tax compliance by providing you with exceptional solutions that are in line with your business services. At Taxaide, we develop strategic plans, including a tax plan that is broad-based and prioritized yet flexible enough to accommodate the complex nature of the Nigerian tax regime. Our tax professionals can help your tax function become less laborious and time consuming. Our seamless, efficient, and effective tax Management service entails doing the following and more:

  1. Providing tax advice to ensure your compliance and tax efficiency.
  2. Utilizing our strong relationships with the states’ IRS (Internal Revenue Service) to resolve any issues on your compliance or tax pay-out; and
  3. Ultimately ensuring you timely obtain your clearance certificates and record updates.

For more information on all tax-related issues, please do not hesitate to contact us at:

Tel: +234 700 TAXAIDE (0700 829 2433), +234 1 631 0971

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Email: business@taxaide.com.ng