Fiscal Measures


 Policy Statement 


The government shall introduce a series of fiscal measures, in order to stimulate further investment and growth in the IT sector with the creation of a favourable investment climate for the development of a globally competitive IT enabled economy.


 Objectives 

  1. To develop fiscal mechanisms that quickly respond to the fast changing needs of an IT based economy.

  2. To position the economy to secure capital inflow, retain capital and encourage local and foreign direct investment.

  3. To use favourable fiscal policies to ensure that Nigerian IT products and services are globally competitive.

  4. To establish and operate duty free IT zones to attract investment.

  5. Fuel the development of economic sub-sectors, asset accumulation, and fiscal activities that arise from IT use.

  6. Endow the nation and its citizens with high margin employment opportunities.


 Strategies 

  1. Provide a sound, responsive and efficient regulatory environment.

  2. Encourage the development of the professional services sub-sector, where manpower is provided to work on customer's sites on a time-charge basis.

  3. Promote the growth of alliances and partnerships among local firms and with foreign firms through the establishment of joint ventures and strategic alliances based in tax-free technology parks.

  4. Imported IT components and software tools, for industries set up for the sole purpose of exporting finished IT products and services, will be duty free.

  5. The import duty on IT "knocked down" components for the domestic market will be 1.5% whereas import duty on imported finished IT goods for the domestic market will be 7.5%. Three percent of the accrued duty will be paid directly to the National Information Technology Development Fund. 

  6. Tax holidays will be accorded to all enterprises that demonstrate substantial financial commitment to the advancement of IT capacity and training for its staff as an extension of the Industrial Training Fund (ITF) and Centre for Management Development (CMD) mandates in collaboration with the NITDA.

  7. Federally owned, funded or controlled organisations for a period of 3 years from the effective date of this policy will not deduct the statutory with-holding taxes from payments to Nigerian IT solution providers for the following services:
    a. One hundred percent locally developed software
    b. Locally assembled or manufactured ICT equipment
    c. Internet access services, local web hosting, and local web-site design
    d. ICT equipment maintenance

  8. Government through its statutory bodies will promote the self-sustained development of Nigerian IT solution providers in areas such as training, software development and "service" houses by ensuring that not less than 30% of the value of all ICT contract awards are undertaken using local value added products, services or personnel.

  9. Stimulate the proliferation of high-speed internet gateways through a less stringent licensing regimen towards Internet Service Provider's (ISP's) and Internet Access Provider's (IAP's), and a reduction of the licensing processing time to seven working days and reduction of licensing fees to only cover administrative costs.

  10. Providing legal safeguards for the privacy of individuals and the confidentiality of transactions against misuse.

  11. Government through the Central Bank of Nigeria (CBN) will set a deadline for the conversion of transactions such as Letters of Credit (L/C), Form-M, Bills of Lading and related import-export documentation to electronic formats by importers and exporters; and empower banks to engage in, manage, and finance e-commerce transactions.

  12. Adopting a Tax exemption on Export Profits for 5 years.

  13. Establishing various IT parks across the country to be designated as duty free IT Zones. All companies located in the IT zone and science parks are to be granted the same incentives as those in the Export Processing or Free Zones, such as:
    a. Pioneer Status that guarantees firms Tax exemption for a period of 5 years.
    b. Export Incentives that are similar to the incentives in the Export Processing Zones (Export Processing Decree No. 34 of 1991) - Zero levies; zero-rates for states and LGA's.
    c. Other Incentives include 50% Tax rebate on interest paid by IT companies on loans to local banks. This will reduce interest rates significantly and make lending to such companies more attractive..

  14. Accelerated capital allowances over half of the approved life of the IT equipment, which will enable investment in such equipment.

  15. Establishing a National Information Technology Development Fund (NITDEF) managed by the NITDA.

  16. 50% Tax rebate on dividends accruing from shares in IT and Biotechnology companies.

  17. Access to special development funds such as the NITDEF or other funds to be approved by government from time to time.

  18. Remitting proceeds (Net of all taxes) and other obligations in the event of a sale or liquidation of the enterprise or any interest attributable to an offshore investment.

  19. Enacting laws for the protection of investments and property from expropriation.

  20. Promoting government procurement policies to favour IT and enterprises located in the Parks.



Conditionality


In order to take full advantage of the favourable incentives offered in the IT Park free zones, appropriate conditionalities are to be worked out by NITDA. The key objective is to stimulate technological growth and development, IT literacy and R & D efforts. Companies must employ at least 75% local staff and invest at least 15% of profit tax on R & D.