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Tax relief for pioneer companies

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The Nigerian Government has over the years put in place many different and overlapping incentive schemes to attract both local and foreign investment. Tax exemption is generally regarded as an industrial investment device; many developing countries like Nigeria offer it as one of their major incentives.

tax-ok Basically, tax incentives are designed to encourage investments in certain preferred sectors of the economy and sometimes geared towards attracting inflow of foreign exchange to complement domestic supplies for rapid economic development.

Tax exemption otherwise known as tax holiday is one of the most widespread tax incentives. Tax exemption simply means a period of exemption from payment of taxes imposed by the government and this may be complete or partial. The granting of pioneer status, for instance, gives a company a preferred position in getting established, usually through exemption of income tax payment.

A pioneer company is a company that engaged in manufacturing, processing, mining, servicing and agricultural industries whose products have been declared pioneer products on satisfying certain condition as determined by the Industrial Development Coordinating Committee (IDCC) of the Government under the Industrial Development (Income Tax Relief) Act Cap 179 LFN 1990.

The pioneer tax holiday is for an initial period of three years or subject to further extension of two years or five years (once and for all without further extension).

  • Enabling Act

Act Chapter 179 laws of the federation of Nigeria (LFN) 1990 but first enacted by Decree No22 of 1971 and commenced on 1/4/1970.

Commencement Date 1st April, 1970

  • “An Act to repeal and re-enact, with major changes, the industries Development (Income Tax Relief) Act and to make provision for tax relief for certain industries that may be issued with pioneer certificates by the minister and other matters ancilatory there to”.


?           Industry is not being carried out on a suitable scale as required and there are prospects for further development in the industry or its product.

?           If it is in the public interest to encourage the industry or its product.

?           Application may be made for the inclusion of a product on the pioneer list

Mode of Application

?           All application to be addressed to the Minister.

?           State the status of the company.

?           Give details of qualifying capital expenditure to be incurred.

?           Give sources of qualifying capital expenditure and estimated cost.

?           Specify location of Assets.

?           Date of production of pioneer products.

?           Any by product not being a pioneer product.


?           Must be in terms of the application to which it relates.

?           Specify permissible by-products to be 1

?           Specify period within which company must be incorporated and conditions to be endorsed

?           Pioneer status will only be issued from a date when company was incorporated and shall be effective from a date not earlier than the date on which the application was submitted to the minister or date of incorporation, which ever is the later.

?           Any other condition will be specified by the minister

?           The minimum Tax relief period not exceeding five years to be stated 3(6)(a-b)

Amending of Pioneer Certificate to Add New Product

Section 4 (1) – (3) allowed a company during its pioneer period to make application in writing to the Minister to add a new product.


  • Where a pioneer certificate is to be operative from a retrospective date, all acts shall be treated as not having been closed or not having happened and all taxes paid (if any shall be repaid as soon as may after the expiration of three months from the production day.


  • No later than one month when the company is going into commercial production (marketable quantity), the company shall apply in writing for the certification of its production date.
  • Not later than one month after the production date or any extended period granted by the FIRS, the company shall make application in writing to the FIRS for the certification of the amount incurred as qualifying capital expenditure prior to the production date.

Cancellation of Pioneer Certificate

  1. i) A Company may apply for cancellation
  2. ii) If a company contravened any provision of the Act or failed to meet conditions set.

Tax Relief Period

  1. i) Commencing from the production date, it shall continue for three years (but can be extended):-
  2. ii) for another one period of two years (if the standard and rate of expansion are satisfactory), local raw material utilization expansion, training and development of Nigerians, Government Policy Priority)

iii)       Five years (once and for all).


Conditions of Old Trade or Business of a Pioneer Company

?           The old trade shall be deemed to ceased permanently at the end of the tax relief period.

?           The pioneer company deemed to have set up a new trade on the day next following the end of its relief period.

?           All capital expenditures incurred and used by a pioneer company shall be deemed have been incurred on that day next following the end of its tax relief period.

?           Where it incurs a Net loss, that loss shall be deemed to have been incurred on the date on which its new trade commences i.e. it will be allowed to deduct all the losses brought forward from the pioneer period

?           The company must submit to the FIRS a list of its assets for certification.

?           At the end; the FIRS will issue a certificate of qualifying expenditure.TAX

?           The Board is expected to issue the company for each year, the amount of income as ascertained and loss as arrived at (if applicable).

Treatment of Capital Allowances and Losses

  • A capital expenditure incurred shall be deemed to have been incurred on that day next following the end of the pioneer period. I.e. regardless of the number of years granted a pioneer company, all capital expenditures incurred in line with the provision of the second schedule within the periods shall be deemed to have been incurred after the Tax relief period.
  • For losses incurred within the pioneer period, the cumulative amount will be deemed for computing total profits to have been incurred on the day, next following the pioneer period i.e. it will be allowed as a deduction in the new business.


?           Memorandum and Articles of Association

?           Certificate of Incorporation

?           Answer to standard questionnaire

?           Pioneer Certificate issued

?           The period approved

?           Production date

?           Products and by-products

?           For a going concern, the Audited accounts ended before the production date to be furnished (regardless of the number of months).

Rendition of Returns

?           The conditions governing the submission of tax returns in CITA are applicable to a pioneer company.

?           One year from commencement of production date.

?           Period of one year successively.

?           Last year of the relief period.

?           Example: Kano Money Lender Ltd was granted a pioneer status commencing from 1st July, 1999. The company has 31/12 as its accounting date. The period granted was for five years.

?           At the expiration of the pioneer period, it submitted accounts for the years ended 31st December, 2004 and 2005 you are given these additional data


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