Taiwo Oyedele, West Africa Tax Leader and a member of PwC Global Board for Leadership Development, has revealed that SMEs and other small companies actively involved in primary agricultural production may be granted pioneer status for almost six years.
This disclosure was made in a tweet shared by the tax expert who played a major role as a member of the Inter-Ministerial Committee that drafted the 2020 Finance Bill.
According to Oyedele, small businesses and companies engaged in primary agricultural production in the pioneer industry such as crop, livestock, forestry and fisheries may be granted pioneer status for an initial period of 4 years and an additional 2 years – making a total of 6 years.
What you should know
- The Pioneer Status Incentive (“PSI”) is one of the available tax incentives in Nigeria aimed at attracting investment into critical sectors of the Nigerian economy.
- It was included in the key reforms of the new Finance Act 2020 to incentivize qualifying entities. According to the amendments made in the new Finance law which seeks redress in pioneer status, qualifying entities would be granted an income tax holiday of up to six years (four years initially and renewable for an additional two years) to entities that meet the criteria.
- In addition, pioneer companies may enjoy other benefits including an exemption from withholding tax on dividends paid out of business profits.
Why this matters
- The Pioneer Status Incentive is an impressive move as it will help to benefit corporate entities to cut down on overhead cost through tax exemption for the total period of incentive.
It will also double down on all companies operating in the crop, livestock, forestry and fisheries production space, as a pioneer industry to reduce the cost of doing business, in a bid to stimulate the development of the primary agricultural production subsector of the Nigerian Agricultural sector.
This reform as captured in the 2020 Finance Act demonstrates the FG’s commitment to supporting business owners and other stakeholders in the Agricultural sector with a view to fostering increased participation.
About the 2020 Finance Act
- The Finance Act 2020 which takes effect from 1st January 2021, introduces over 80 amendments to 14 different laws.
- The finance bill 2020 seeks to support the implementation of the 2021 budget by proposing key reforms to specific taxation, customs, excise, fiscal and other laws including CITA, IDITRA, PITA, TETA, CETA, VATA, SOA, FIRSEA, FRA and PPA.