Are You In Entertainment Industry? See 5 Tax Incentives Just For You
So, the Nigerian Creative Summit is currently underway in Lagos. Part of the sessions covered at the event at the opening day was taxation for the creative industry.
Of course, the Federal Inland Revenue Service, FIRS was there to deliver a keynote speech titled: “The Ripple Effects of Taxation: Benefits to the Creative Industry”.
It was delivered by FIRS’ Deputy Director, Abolade Kehinde, who represented the FIRS’ Executive Chairman, Babatunde Fowler.
The presentation talked about how the creative industry can benefit from an environment with high tax compliance.
But the major take-away for us were the incentives available to the creative sector.
Bounce News had an exclusive chat with Mr. Kehinde after his presentation and he took time to explain how it works.
1. Pioneer status: These are for companies that are in the pioneer industries.
There are about 27 of them and the Information and Communications Technology, ICT industry is one of them.
The pioneer status gives you 5 years exemption on company income tax, withholding tax on dividends and allowances on capital expenditures (tax exemption when you procure certain equipment for your business).
It is usually deferred after the 5 years and that then gives you additional tax savings as you only begin to pay tax after 5 years.
Also Read: How To Reduce Your Tax Burden
The reason for this exemption is that government understands that in production, you spend money at the beginning and begin to make money much later.
2. Research & Development: This is a tax exemption that applies only to research and development institutes.
It really applies specifically to scientific research and development but according to the FIRS executive, there are ways in which you can essentially take advantage of it if you are trying to do something innovative in creative sector, maybe by creating a digital product. That would apply as well.
3. Low Tax Treaty Concession: This treaty exemption is for companies that its shares are owned by foreign companies.
It’s essentially a Nigerian company but its owned by foreign investors. The foreign investor would normally pay 10% withholding tax on dividends he is repatriating to his country.
But if that investor is in a treaty jurisdiction (a country that Nigeria has a tax treaty with), the withholding tax is then reduced to 7.5%.
4. Accelerated Capital Allowance Scheme: This applies when you spend on specific items that allows you to claim 100% of the capital cost of the item purchased. So, you can even get 110% deductions instead of 100%.
This is used as an incentive for businesses to purchase a certain kind of equipment targeted at reducing carbon emission for instance.
5. Repatriation Of Net Earnings Outside Nigeria: This concerns celebrities who go to perform overseas and they get paid in foreign currencies.
Now, they are supposed to pay tax on that income even though it was earned outside Nigeria because they are resident here.
But with this arrangement, if they bring it back to Nigeria, it is tax-free. So, there is no point to avoid tax since you can just bring it to your domiciliary account in Nigeria.
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