In the past few years, the FIRS has questioned the eligibility of some companies that were granted pioneer status incentive (exemption from corporate income tax). In view of this and given the recent decline in revenue, the federal government initiated a process to review existing incentive regime especially pioneer status. 

As part of the review, the management of the Nigerian Investment Promotion Commission (NIPC), the agency in charge of the incentive, was replaced and all applications for pioneer status were put on hold pending the outcome of the exercise. The NIPC organised a series of stakeholder meetings in November and December 2014. One of the key objectives was to provide policy clarifications on investment related issues including pioneer status.

The NIPC has now written to some companies that were granted the incentive for a straight 5-year period that it should have been for 3 years in the first instance. This is because the law does not provide for a straight 5-year grant but rather 3 years, then additional 1 year and a final 1 year subject to satisfactory performance. The FIRS has consequently raised additional assessments on some of the companies for the last 2 years of their 5-year pioneer status.

It is not clear yet if this will be extended to all companies that were granted the 5-year pioneer status or only those considered ineligible for the incentive. In any case, any company that is legally entitled to the incentive has a tenable argument based on the doctrine of legitimate expectation especially if NIPC granted the 5-years unsolicited and the FIRS never objected to it. 

These are tough times and hence the tough measures by government. Based on recent trend, it is extremely important to follow strictly what the law says rather than just the established practice of government agencies which can be challenged or reversed at any time.

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