ATAX – May 2017 – L3 – Q2b – Tax Incentives and Reliefs

List five tax incentives for companies utilizing associated gas in downstream operations.

Question

State FIVE incentives available to a company engaged in the utilization of associated gas. (5 Marks)

Answer

Tax-Free Period:
An initial tax-free period of three years, extendable for another three years subject to satisfactory performance.
Accelerated Capital Allowance:
A 90% annual allowance with 10% retention is available for investments in plant and machinery after the tax-free period.
Investment Tax Allowance:
A 15% investment tax allowance is granted, which does not reduce the asset’s value.
Zero Petroleum Profits Tax (PPT) and Royalty:
Gas transferred from NGL to Gas-to-Liquids (GTL) facilities is taxed at 0% PPT and 0% royalty.
Tax-Free Dividend:
Dividends paid during the tax-free period are exempt from tax if the investment is funded with foreign exchange, provided at least 30% of the equity share capital is invested in imported plant and machinery.