PIONEER STATUS INCENTIVE SCHEME; EXPANDED COVERAGE AND REVISED GUIDELINES: RESPITE IN THE THICK OF TAX DRIVE? (Part II)

HOW TO APPLY- NEW APPLICANTS

New applicants are to apply for the PSI as follows:

  1. Write to NIPC first and foremost, describing the project profile. Those seeking clarifications as to whether they qualify are encouraged to do so at this stage.
  2. Request for date to present the project.
  3. Present project on agreed date after which NIPC provides feedback and requests payment of application and due diligence fees.
  4. Pay application and due diligence fees within a week.
  5. Submit completed part 1 of application form to the executive secretary of NIPC and provide supporting documents in hard or soft copy.
  6. NIPC reviews application and performs regulatory, legal and compliance checks, requests date for verification visit and visits the project.
  7. NIPC makes decision on application, notifies the company of this decision and requests payment of service charge to be made within a week.
  8. Make the service charge deposit to NIPC and send payment confirmation them.
  9. NIPC issues approval in principle and sends duplicate by email and copies to FIRS, IID and State Ministries.
  10. Complete part 2 of the application form and submit to IID in soft or hard copy.
  11. IID reviews application for completeness, requests inspection visit and determines production day after visiting.
  12. IID issues production certificate, sends duplicate by email and notifies NIPC.
  13. NIPC issues Pioneer Status Incentive certificate, sends duplicate by email and sends copies to FIRS and IID.

The application process takes about 6 months to complete.

HOW TO APPLY- EXTENSION APPLICANTS

Applicants seeking to extend their already obtained 3-year pioneer period, by a further 2 years can do so by following the steps outlined below:

  1. Write to NIPC, then, request date to present project to NIPC.
  2. Present project on agreed date after which NIPC provides feedback and requests payment of application and due diligence fees.
  3. Pay application and due diligence fees within a week.
  4. Submit completed extension application form to the executive secretary of NIPC and provide supporting document in hard or soft copy.
  5. NIPC reviews application, requests date for monitoring and evaluation visit, and visits the project.
  6. NIPC makes decision on extension application.
  7. NIPC issues PSI Extension Certificate, sends duplicate by email and sends copies to FIRS and IID.

This process takes about 4 months to complete.

IMPORTANT CHANGES IN THE NEW APPLICATION GUIDELINES

In comparison with the “Pioneer Status Incentive Regulations” of 2014, issued to provide operational guidelines for applying for the PSI, the recently issued Application Guidelines present certain revisions as follows:

  1. More robust and elaborate application guidelines: The revised application guidelines provide elaborate, end to end guide on processing of PSI – starting from a comprehensive overview of the PSI regime; explanation of the meaning of PSI, how a company can qualify, hierarchy of regulatory bodies, application flow chart (for New and Extension applications), project presentation formats, supporting documentations, form completion and package submission guide, fees schedule and compliance requirements during the pioneer relief period. This makes the application process very transparent and much easier to follow.
  1. Introduction of a new process of writing to NIPC and presenting project prior to making payments and submitting application forms: The new guidelines now require all intending applicants to write a letter of intent first to NIPC, agree and present project before being formally invited to make the statutory payments, complete and submit application forms in the required format. Prior to the revision of the guidelines, applicants were expected to pay the statutory non-refundable application fee of N200,000, complete and submit the application forms before ever getting to present the project which may eventually not qualify for PSI. This new introduction is good, since it gives room for more certainty on the eligibility of the project for PSI before much resources are committed into the application. A flip side to this development however, is that the new phase of writing and presenting project is envisaged to last for at least 5 weeks. Companies making new applications are mandated to do so within their first year of production, so an applicant company that commences the writing phase close to the end of its first year of production would be concerned as to whether the writing and presentation phase would be considered to be ‘application’ in the real sense of it, in case it fails to get to the payment/ form submission stage before its first year of production elapses.
  1. Revision of service charge from 2% of projected pioneer profits to 1% of actual annual pioneer profits: Stakeholders had expressed dissatisfaction at the inclusion of a 2% of projected pioneer profits service charge element in the PSI Regulations of 2014. Eligible companies also perceived it as a disincentive since it contradicts the whole essence of income tax relief under the PSI. Further, no one could precisely predict the future performance of a new and pioneer business in a volatile economy such as ours, therefore, notification of service charge by the NIPC based on projected financials was not considered appropriate. These concerns may have now been partly addressed by the revision of the service charge payable rate and modality to 1% of actual annual pioneer profits. The hitherto lump sum payment on application for PSI has also now been revised and made payable in June of every succeeding year.

…to be continued.

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