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Nairaland Forum / Nairaland / General / Business / Nigeria Tax: Public-private-partnership And Road Infrastructure Development In N (269 Views)
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Nigeria Tax: Public-private-partnership And Road Infrastructure Development In N by Innerkonsult: 12:26pm On Mar 20, 2019 |
[b]The Federal Government of Nigeria ("FGN" ![]() ![]() ![]() ![]() ![]() ![]() ![]() ELIGIBLE ROAD The EO7 defines an Eligible Road as any road approved by the President as eligible for the Scheme on the recommendation of the Minister of Finance and as duly notified to Participants and published pursuant to the Order. Such recommendation, however, is expected to be made from a list of roads presented to the Minister of Finance by the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme Management Committee ("the Committee" ![]() ![]() ADMINISTRATION AND OPERATION OF THE SCHEME The Scheme is to be implemented and administered by the Committee established by the EO7. As provided in the Order, the Committee is expected to: be chaired by the Honourable Minister in charge of Finance while the Honourable Minister in charge of Works is to be the Deputy Chairman. The Permanent Secretary, Federal Ministry of Finance is to act as the Secretary; draw its members from specified Ministries, Departments and Agencies ("MDAs" ![]() ![]() ![]() ![]() facilitate evaluation by the Federal Ministry in charge of Works, the degree of completion of an Eligible Road infrastructure development project and thereupon issue a certificate of work done on an annual basis; facilitate the issuance, on an annual basis, of a Tax Credit Certificate by the FIRS to a Participant or Beneficiary under the Scheme; within fourteen (14) days of the issuance by the Committee of the certificate of work done; do other things, specifically provided in the First Schedule to the Order, necessary for the effective administration and operation of the Scheme. PARTICIPANTS Participation in the Scheme is open to the following set of entities: any company or corporation (other than a corporation sole) established under the Companies and Allied Matters Act or any law in force in Nigeria, and designated as a Sponsor of an Eligible Road pursuant to the Order; any company or corporation (other than a corporation sole) established under the Companies and Allied Matters Act or any law in force in Nigeria, and certified by the Committee as an eligible participant; a pool of companies – operating through an SPV – which undertakes the construction or refurbishment of any Eligible Road. However, to qualify under the Scheme, a pool of companies must be represented by a Fund Manager duly registered with the SEC and certified by the Committee as an eligible participant while the representative SPV must be registered with, and designated by, the SEC as an Infrastructure Fund set up solely for the purpose of managing the amounts received by the pool of companies; and Institutional Investors duly established as a company/companies under the Companies and Allied Matters Act and operating as Pension Fund Administrators, Collective Investment Schemes, Insurance Companies, Investment Banks etc., and are also certified by the Committee as eligible participants. An eligible participant interested in participating in the Scheme is required to submit an application to the Committee, attaching the required documents which include a written notification of Expression of Interest in respect of an identified road project; a valid and current FIRS-issued Tax Clearance Certificate; and Project Cost and Timeline bids which must include design and specification for the identified road project, as specified. PROJECT COST Project Cost under the Scheme is construed as: "any expenditure wholly, reasonably, exclusively and necessarily incurred by a Participant for the construction or refurbishment of an Eligible Road as quoted by the Participant in its Project Cost bid and as certified by the Committee". However, as provided in the EO7, the Committee has discretionary power to determine what type of expenditure may be allowed as part of the Project Cost. In exercising this discretion, the Committee is expected to give due consideration to certain specified costs, namely: cost of road construction or refurbishment; professional service fees paid by the Participant in the course of executing a road construction/refurbishment contract, subject to a limit of 1.25% of the cost of the construction/refurbishment where such costs exceed ten (10) billion Naira; cost of road maintenance for a period of five (5) years following completion of the construction or refurbishment of an Eligible Road; and any amount in excess of the initial project cost, necessarily and reasonably incurred on an Eligible Road, which excess is certified by the relevant regulatory authority. ROAD INFRASTRUCTURE TAX CREDIT The amount of Tax Credit due to a Participant under the Scheme – which is reflected on the face of the Tax Credit Certificate to be issued by the FIRS – is determined by the approved Project Cost incurred in the construction or refurbishment of Eligible Roads plus a single uplift equivalent to the prevailing Central Bank of Nigeria (CBN)'s Monetary Policy Rate ("MPR" ![]() Tax Credit = Project Cost + Single Uplift (MPR) + 2% of Project Cost. The uplift granted to a Participant does not constitute a taxable income in the hands of the Participant or a Beneficiary under the Scheme. Tax Credits are to be issued by the FIRS, through the Committee, and in the name of a registered Participant or its Beneficiary. In the case of a pool of companies represented by a Fund Manager or any other person, the Tax Credit shall be issued to each company in the pool separately in proportion to their respective contribution. However, a person not duly registered and certified by the Committee as a Participant or representative of a Participant; or a person not duly designated as a Beneficiary of a Tax Credit by a Participant; or a Participant/Beneficiary that is unable to provide evidence of certification of the Project Cost by the Committee; shall not be entitled to be issued with a Tax Credit. Required Documentation for Issuance of Tax Credit Certificate Tax Credit Certificates are to be issued by the FIRS to Participants or their representatives, or to Beneficiaries of the Scheme, subject to presentation of the following documents: Confirmation of Authorization to Participate in the Scheme (issued by the Committee); Approval (by the Committee) of the Project Cost and Completion Timeline bid; Contract Award Letter; and Certification of Work done (issued by the Committee). At any stage of an Eligible Road project, the value of the Tax Credit Certificate to be issued shall be in proportion to the percentage of project completion as evaluated by the Committee, plus a proportion of the "uplift" due to the Participant (calculated as a percentage of the total uplift due). Utilization of the Tax Credit Tax Credit issued in any year of assessment is eligible for utilization as credit against the Companies Income Tax payable in the particular year, subject to a maximum of fifty percent (50%) of such tax due. However, it is permissible for an unutilized Tax Credit to be carried forward to subsequent tax years, until fully utilized. Tax Credit as an Intangible Asset (Transferable and Qualified for Accounting Purposes) The Tax Credit issued under the Scheme is a liquid asset capable of being disposed of, either wholly or partially, to willing buyers on the FMDQ Over-The-Counter (OTC) Securities Exchange or any other approved relevant Securities Exchange. This tradability of the Tax Credit is without prejudice to the provisions of Section 22, of the Companies Income Tax Act, 2007 ("CITA" ![]() GUARANTEES & LIMITATIONS UNDER THE SCHEME The Order makes certain provisions aimed at protecting the interest of Participants against possible bureaucratic bottlenecks or administrative inefficiencies, by guarantying the smooth operation of the Scheme in such circumstances. Hence, where a Participant incurred additional cost in excess of the initial Project Cost, such additional amount incurred shall be allowed in the computation of the approved Project Cost, if the Committee is satisfied that such additional cost was necessarily and reasonably incurred; provided that the additional cost is certified by the relevant regulatory authority; under the Scheme, the Committee is required within two (2) weeks to facilitate notification to Participants, of certification (approval) or refusal to certify (disapproval), as the case may be, of procurement of the Project Costs as well as, issue road infrastructure development contract. However, where the Committee fails to notify a Participant of its approval, the Participant shall be entitled to commence work on the particular Eligible Road project; where a notice of refusal to approve procurement of a Project Cost (disapproval) is issued to a Participant, the notice shall contain the grounds for the disapproval and any additional information that must be provided (if any) to secure an approval; and where a certificate of work done has been issued by the Committee to a Participant, the FIRS has within fourteen (14) days to issue the connected Tax Credit. Where the FIRS fails to do this, the Participant shall be immediately entitled to claim its due Tax Credit in its Companies Income Tax Return. The benefits derivable under the Scheme are totally not without qualification. Essentially, there are limitations in certain circumstances which include the following: A Participant (except a Participant executing a road project in a designated Economically Disadvantaged Area) can only utilize its total Tax Credit against the tax payable in any year of assessment, subject to a maximum of fifty percent (50%) of the Companies Income Tax payable by the Participant or its Beneficiary. A Participant entitled to a Tax Credit on an Eligible Road under the Scheme is not entitled to claim, in addition to the Tax Credit, any other tax credit, capital allowance, relief or incentives on the Project Cost incurred, in respect of the same Eligible Road under any law in force in Nigeria. The total professional service fee payable by Participants for the services of consultants in respect of Eligible Roads with Project Cost of ten billion Naira (N10 billion) and above, is limited under the Scheme to 1.25% of the cost of construction or refurbishment. Source: Mondaq |
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