By Emeka Anaeto

LAGOS— The Federal Government has revised its policy on tax holiday for investors in the economy granted under the Pioneer Status Incentive (PSI) Scheme. The tax relief would now be for three years instead of five years.

The Nigerian Investment Promotion Council, NIPC, the federal agency in-charge of the policy, has already started writing to the companies who are hitherto enjoying the holiday to intimate them of the policy revision while urging them to comply.

It was not stated why thiedownward review but sources in the finance ministry indicates a major policy review focusing on aggressive tax system that would rein in the negative revenue profile of the government orchestrated by the oil price crash.

However, tax experts at KPMG Nigeria group are saying that the downward revision aligns the NIPC’s current practice with the provision of the Industrial Development (Income Tax Relief) Act (IDA), for the tax relief period to be for a period of three years in the first instance.

Beneficiaries that meet the stipulated conditions for extension may have the period extended for an additional one or two years, as also provided in the IDA. For companies that have fully utilised the five-year PSI, it is not clear whether they would be required by the NIPC to refund tax for two years out of the five-year period. KPMG is of the view that the directive would apply only to companies that are still within their initial three-year period, but industry operators say the initial PSI grant for five years is whole contract that should not be broken until it runs its full term otherwise it would be a breach to force the current review on beneficiaries.

It is also unclear whether the NIPC would refund the excess two per cent service charge collected from PSI applicants. PSI applicants were required, by virtue of the PSI Regulations 2014, to pay 2% of the estimated tax savings to the NIPC before they could obtain an approval-in-principle.