Are you a tech-savvy entrepreneur with a passion for innovation and entrepreneurship? The Nigeria Startups Act is here to pave the way for the establishment, development, and operation of technology-related talents, products, and services.

This groundbreaking legislation, which is spearheaded by the National Council for Digital Innovation and Entrepreneurship, provides a comprehensive framework for the registration, networking, and financing of startups. With a host of tax and fiscal incentives, as well as support services, this bill is set to revolutionize the Nigerian startup ecosystem and provide a fertile ground for the growth of the next generation of tech giants. 

Nigeria Startups Bill 2021

This Bill mainly focuses on Technology-related talents, Products, and Services, and aims to simulate their establishment, development, and operations.

The National Council for Digital Innovation and Entrepreneurship (The council) via its secretariat is responsible for the formulation, implementation, and collaboration and provides general policy guidelines for the realization of the objectives of this Act.

The President of the Federal Republic of Nigeria and his vice is the chairman and alternate chairman respectively. On the Council’s approval, the secretarial shall establish a Startup support & engagement portal.

Functions of the portal

• It will serve as the platform for the registration with relevant Ministries, Departments, and Agencies.
• It will facilitate license issuance, networking among stakeholders, and Finance to all labeled startups.
• Through the portal, the council will set up a body called Startup Consultative Forum for information sharing and collaboration in the Nigerian startup ecosystem. Which shall comprise, Labeled startups; Venture Capitalists; Angel investors; the Nigerian Computer society; incubation, accelerators & an innovation hub; and 2 civil society bodies involved in the advancement of techs & innovation.

For the grant of a startup label, the Act stipulates some requirements:

Registered as a limited liability company under CAMA 2020 (as amended) with the existence of not more than 10 years from the date of incorporation. With the objective of commercialization of a digital technology innovative production process. Also, at least 1 Nigerian is a co-founder with the right to share the profit or revenue from the sales of shares.

Unlike the limited liability company with a permit of labeled startup on fulfillment of the requirement. A sole proprietorship or partnership shall be granted a status called “Pre-label startup” for a period of 6 months upon fulfillment of requirements set out in the Act. 

Tax and Fiscal Incentives

• A labeled startup may apply to the Nigerian investment promotion Commission for Pioneer status tax reliefs and incentives under the scheme. More so, Federal Finance Ministry may simplify the requirements for a startup to benefit from existing fiscal incentives
• Income tax relief is also applicable on its income or revenue for a period of 4 years commencing on the date of issuance of the startup label.
• Percentage-based tax relief for a labeled startup with a minimum of 10 employees, and 60% where without any work experience and fall within 3 years of graduating from school shall enjoy income tax relief of 5% of assessable profit for a maximum period of 5 years
• Furthermore, access to export facilities, governmental grants, loans & facilities, and credit guarantee schemes.
• Incentives and reliefs for investors investing in a labelled startup or in the startup ecosystem to enjoy tax credits on their investment equivalent to 30% of the investment. More so, share disposal in labelled startups shall not be subject to CGT Tax.
• Tax incentives for employees of a labelled startup shall enjoy a 35% personal income tax exemption for a period of 2 years from the date of engagement by a labelled startup subject to eligibility criteria set by the council secretariat and Joint Tax Board.
• Tax incentives for external service providers and foreign entities which provide any services to a labeled startup shall be subjected to 5% WHT tax on income derived and deem final if not a registered Nigeria company.

Support services by the council’s secretarial

Labeled startups shall get the council's support on affairs that as to do with the:

• Corporate Affairs Commission
• Protection of Intellectual Property Rights
• Crowdfunding
• Transfer of Foreign Technology in conjunction with the National Office for Technology Acquisition and Promotion (NOTAP)
• Obtaining Licenses for a Financial Technology Startup from CBN & SEC
• Participation of a Labelled Startup in Regulatory Sandboxes
• Listing of a Startup on Exchanges
• Repatriation of capital and profits
• Accelerator and incubator programs & incentives
• Establishment of clusters, hubs, and innovation parks
• Establishment of Startup Investment Seed Fund managed by the Nigeria Sovereign Investment Authority
• Training, talent development, and capacity building
• Support of Academic Research Institutions etc.

Overall, the Nigeria Startups Act 2021 is a great development for the nation's economy, as it provides a framework for the growth and development of technology-based startups in Nigeria. The Act's various initiatives and incentives will undoubtedly encourage innovation and entrepreneurship, and help to drive economic growth and development in the country.