A new fiscal incentive has been introduced allowing companies in Nigeria to claim a deduction of up to 5 percent of their annual turnover for qualifying research and development expenditures.
This provision forms part of ongoing efforts to stimulate innovation and domestic investment in R&D across key sectors of the economy. The deduction is applied against assessable profits and is intended to reduce the effective tax burden on companies that commit resources to developing new products, processes, or technologies within Nigeria.
Tax practitioners note that companies seeking to benefit from the incentive must ensure their R&D activities meet the statutory definition of qualifying expenditure. Proper documentation, including records of project scope, costs incurred, and the nexus between the research activity and the company's trade or business, will be essential for audit purposes.
The 5 percent ceiling, calculated on turnover, represents a significant concession. However, businesses should carefully evaluate how the deduction interacts with other existing investment allowances and capital allowances to avoid double claims or disallowances upon review by the Federal Inland Revenue Service.
Further guidance is expected from the tax authorities to clarify implementation details, including the effective date, sector-specific exclusions, and the process for obtaining pre-approval where required.