Nigerian Companies can only obtain gas utilisation incentives for specific operations and not for the whole company.
This amendment is contained in the Finance Act 2020, which was signed into law by the President Muhammadu Buhari in December 2020.
As part of the amended tax law in the Finance Act, companies can no longer enjoy gas utilisation incentives as well as other special tax incentives for the same assets.
In an explanatory note obtained by BizWatch Nigeria from PricewaterhouseCoopers (PwC) on the incentive, the consulting firm explained that a company that has enjoyed tax holidays under the “pioneer status” rules, cannot transfer the same assets to another company or Special Purpose Vehicle (SPV) and claim gas utilisation incentives.
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The PwC said, “Power companies that are eligible for the gas utilisation incentives need to properly analyse the various incentives options available to them before deciding which to apply for.
“Also, the minimum tax rate reduction is a welcome reprieve for the affected Companies, as it would help reduce their tax burden, even if temporarily.”
The government introduced the incentive to support the investment of companies that use Nigerian gas in producing power.
This incentive is contained in the Section 28 (g) of Companies Income Tax Act as amended.
Beneficiaries of the gas utilisation incentive will enjoy a tax-free period for up to five years; accelerated capital allowance after the tax-free period; and tax-free dividends during the tax-free period.
They will also be exempted from paying VAT and Customs duty on plant, equipment or spare parts purchased in connection with the utilisation of gas in downstream petroleum operations or the conversion of such gas into electric power.
