On Monday 7th August 2017, the Federal Ministry of Industry, Trade and Investment (“FMITI”) announced the addition of 27 new industries to the list of pioneer status industries/products. This follows the earlier announcement of the lifting of the ban on the grant of pioneer status incentive after last week’s Federal Executive Council (“FEC”) meeting.
Pioneer Status Incentive (“PSI”) is a tax holiday provided for under the Industrial Development (Income Tax Relief) Act (the “Act”), that grants qualifying industries/products relief from the payment of corporate income tax for an initial period of three years, renewable for one or two additional years. An industry or product is designated as pioneer if it is not being carried on in Nigeria on a scale suitable to the economic requirements of the country or not at all; or where there are favourable prospects for further development; or if it is expedient in the public interest to encourage the development and establishment of an industry in Nigeria. PSI is granted to critical industries in order to reduce the cost of doing business and by so doing, stimulate establishment and/or development of those industries.
The FMITI also issued Application Guidelines for Pioneer Status Incentive (the “PSI Guidelines”). Pursuant to the PSI Guidelines, the Nigerian Investment Promotion Commission (the “NIPC”) is responsible for processing applications for the grant or extension of PSI. The PSI Guidelines set out application requirements as well as ongoing obligations for PSI beneficiaries. The NIPC has the power to cancel PSI where either the Act or the PSI Guidelines have been contravened.
Of note is the inclusion of additional industries like e-commerce services, software development and publishing. The list also incudes creative industries such as motion picture, video and television programme production, distribution, exhibition and photography, music production, publishing and distribution. Other industries include manufacturing of industrial equipment such as machinery for food and beverage processing, textile, apparel and leather production, paper and paper board production.
The PSI Guidelines provide that the list of pioneer industries/products can be amended by the FEC. The list is to be reviewed every two years. Any additions approved by the FEC shall become effective immediately while approved deletions shall be phased out within three years.