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INCORPORATING A BUSINESS IN NIGERIA

Meaning of ‘NIPC Registration' and ‘EXPATRIATE QUOTA'

NIPC Registration confers permanent authorisation for the local operation of businesses with foreign investments either as branch/subsidiary of a foreign company or otherwise.  

Expatriate quota is the official permit to a company; conveying permission for the company to employ individual expatriates to specifically approved job designations, and also specifying the permissible duration of such employment.  

The expatriate quota forms the basis of work permits for expatriate individuals employed (whose qualifications must fulfil the criteria established for the particular quota position). Expatriate quota positions are usually granted for 2-3 years subject to renewal, EXCEPT in cases where companies qualify for and are granted “PUR” Quota (i.e. Permanent Until Reviewed) position.  

The Current Regulation on the Appointment of Foreign Directors

The promoters of business ventures in Nigeria are free to appoint directors of their choice, either foreign or Nigerian, and the directors may be resident or non-resident. The application to the NIPC must reflect the names of the proposed Nigerian and foreign directors (with an indication of resident and non-resident directors). The Registration Certificate consequently issued following such application usually reflects the respective names of the proprietors of the company, as well as the directors representing each proprietor or co-proprietor.  

Payments of foreign directors' fees are remittable in the same manner as dividends accruing to the foreign company. However, since such fees are taxed at source (5% as withholding tax), each foreign director's fees are remittable subject to satisfactory evidence that the taxable amounts on such fees have been paid.  

 

Pioneer Status (Tax Holiday ) Advantages to a Company

The Industrial Development (Income Tax Relief) Act, Cap. 179 Laws of Nigeria, 1990, declares a number of industries as pioneer industries. Thus, any company whose products fall within the categorised industries could be conferred with Pioneer Status.  

This designation is not necessarily a reflection that a company was pioneer per se in the industry, as several companies within the same pioneer industry classification could qualify for Pioneer Status. Where the activities of a company include the production of pioneer and non-pioneer products, the tax relief available on conferment of Pioneer Status would be restricted to income derived from pioneer products only. Under the current industrial policy, conferment of Pioneer Status accords a company relief from income tax liability for a period of up to 5 years (tax-holiday status).  

The criteria for granting Pioneer Status are related and/or based on the following considerations: -  

(i)  the amount of qualifying capital investment in a company (N5 million and above) must be verifiable by physical inspection and supported by a report of the Industrial Inspectorate Division of the Federal Ministry of Industry before a Pioneer Certificate is granted.  

(ii) the socio-economic advantages of a company's activities to the Nigerian economy as set out in its Feasibility Study is also an important consideration.  

Without prejudice to these conditions, NIPC is empowered to confer Pioneer Status and other investment incentives, in any other deserving circumstance as the Council of NIPC may approve in accordance with the provision of the Nigerian Investment Promotion Commission Act and the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act in 1995.  

However in the case of portfolio investment in the capital market, the Securities and Exchange Commission (SEC) regulates the market. 

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