Several incentives are available to players in the Nigerian power sector, these incentives include but are not limited to withholding tax exemption on foreign loans, Pioneer Status Incentive (PSI), and Gas Utilization Incentive (GUI).
Our area of focus today is the gas utilization incentive.
The Company Income Tax Act (CITA) defines gas utilization as the marketing and distribution of natural gas for commercial purposes and it includes power plants, fertilizer plants, gas transmission, and distribution pipelines.
Section 39(1) of CITA grants tax incentives to companies engaged in the business of gas utilization in downstream operations.
The incentive grants qualifying companies an initial tax-free period of three years which may be renewed for an additional two years subject to the company’s performance.
The incentive also provides an accelerated capital allowance after the tax-free period and a tax-free dividend during the tax-free period.
This incentive is geared towards promoting investment in the gas sector, especially with the rising global demand for cleaner energy where Nigeria is an active player.
Please note that a company operating in this sector can not claim both Pioneer Status Incentive and Gas Utilization Incentive.
