The Federal Government has lifted the administrative suspension on processing Pioneer Status Incentives (PSI) applications and has announced the release of new guidelines for PSI applications as well as a revamped list of pioneer industries and products.
Included in the new list are two key elements relevant to the property sector:
- Real Estate investment vehicles under the Investment and Securities Act,
- Mortgage backed securities under the Investment and Securities Act.
- Full list of new industries added.
To provide the necessary context, the Pioneer Status Incentive is tax holiday given to companies for a period of time (usually between 3 and 5 years), to encourage the growth and spur investment into the economy. It is meant to be granted for an initial period of 3 years with a possibility of an extension for another 2-year period, however, the Nigerian Investment Promotion Company has in the last decade, granted pioneer status to successful applicants for a straight period of 5 years.
As stated within the Investment and Securities Act 2007, a real estate investment company or trust may be registered by the Commission if it:
- is a body incorporated under the Companies and Allied Matters Act;
- has a capital and reserve as prescribed by the Commission from time to time;
- carries on business as a collective investment scheme solely in properties;
- complies with the requirement prescribed by the Commission through its rules and regulations made from time to time.
Regulation regarding taxation of real estate investment companies and trusts has been a major challenge as the corporate tax exemptions that should be available to these entities are currently very ambiguous. The inclusion of real estate investment vehicles on the pioneer list appears to be a step in the right decision from the Nigerian government and her regulators.
According to the Minister of Industry, Trade and Investment, Okechukwu Enelamah, the Federal Executive Council (FEC) at its last meeting approved these actions along with the addition of the 27 key industries and deletion of two industries as well as a biennial review of the list going forward. In line with the reform provisions, all additions will be added to the list immediately, and all deletions will be removed from the list in 3 years.
The Executive Secretary of the Nigerian Investment Promotion Council (NIPC) Ms. Yewande Sadiku, stated:
“The reforms have brought further clarity, predictability and process efficiency to the PSI regime. We will continue the reform process as we plan to take the PSI application process online. We will also engage with relevant stakeholders with a view to updating the existing legislations.”
The Investment Securities Act, Application Guidelines for Pioneer Status Incentives, Pioneer Status Incentive Regulations and more are available on the Real Estate Laws section of estate intel.