The Federal Government through one of its twitter handle @AsoRock announced that its has approved a tax incentive for one of Alhaji Aliko Dangote’s companies to the tune of about 70%. The tweet read in part that the Federal Executive Council has approved a Memo for “Dangote subsidiary to fund and build Obajana-Kabba road using cement, in exchange for tax incentives”.
BRF: Council approved Memo for Dangote subsidiary to fund and build Obajana-Kabba road using cement, in exchange for tax incentives
— Aso Rock (@AsoRock) May 18, 2016
The incentive is on the back of a the Companies Income Tax (Exemption of Profit) Order 2012 passed by the Goodluck Jonathan government which provides tax incentives to companies under certain conditions including.
“The order stipulates that where a company provides infrastructure of a public nature (which it can also enjoy for its own benefit), 30% of the cost of the infrastructure will be granted as a tax deductible expense in addition to any other tax deductions granted in respect of these expenses, including capital allowances and investment allowance. Infrastructure includes (but is not limited to) electricity, roads, bridges, water, health facility, educational facilities and sporting facilities. Before granting the exemption, the infrastructure must have been completed and should be accessible to the public, except where this is impracticable or a special exemption is obtained by the company from the Ministry of Finance.”
Essentially, whenever a company spends money building for example, a road that serves the community and the company the government will grant them a tax allowable expense of the cost of road in addition to 30 percent of the cost of the road. For example, if it cost Dangote Ltd N5 billion to build a road, the government will allow them deduct N5 billion and another N1.5 billion (30%) totaling N6.5 billion before arriving at how much the company will pay as tax. The tax incentive is expected to expire in April 2017.
Aliko Dangote once again seems to have benefitted from another tax incentive from the government just the way he did with pioneer incentives.