TAX AND OTHER INCENTIVES AVAILABLE TO A LABELLED STARTUP UNDER THE NIGERIA STARTUP ACT, 2022

President Muhammadu Buhari signed the Nigeria Startup Act into law on 19 October 2022, marking a significant milestone for Nigeria’s tech ecosystem . The Act is a product of collaborative engagement between the Presidency and young innovators and startups across the country, designed to foster innovation, attract investment, and create a favourable business climate for tech-enabled startups . It aims to position Nigeria as a leading hub for digital entrepreneurship in Africa by removing regulatory barriers and offering targeted incentives .

The Nigeria Startup Act 2022 (NSA) is a transformative legislative framework designed to stimulate innovation, entrepreneurship, and economic growth in Nigeria’s tech ecosystem . With Nigeria having attracted approximately $410 million in startup funding in 2024, the government sees the Startup Act as a tool to deepen that investment pipeline and improve the ability of local companies to scale .

This comprehensive guide examines the tax and other incentives available to a labelled startup under the Nigeria Startup Act 2022, covering tax and fiscal incentives, funding access, regulatory support, and investor incentives. It also explores the eligibility requirements for obtaining the Startup Label and the ongoing compliance obligations.

The Pain Points: Why Startup Incentives Matter for Nigerian Founders

The Financial Burden on Early-Stage Businesses

Starting and scaling a technology-enabled business in Nigeria presents significant financial challenges. Founders face high operational costs, substantial capital requirements for product development, and the burden of tax liabilities during the formative years when reinvestment is critical. The Act addresses this by providing tax relief that allows startups to reinvest significantly in their growth .

The Complexity of Navigating Government Incentives

The Startup Act contains more than 31 incentives spread across six broad categories—tax and fiscal incentives, regulatory support, funding access, exports and trade, ecosystem development, and training and capacity building . More than 15 government institutions are involved in delivering these incentives, making coordination a major challenge .

The Gap Between Policy and Practice

Despite the passage of the Act, many startups have struggled to access its benefits. The government is now shifting focus from designing the policy to delivering its benefits to businesses . This requires government agencies, private-sector players, and other stakeholders to work together to remove institutional bottlenecks .

Investor Uncertainty

Potential investors often face uncertainty about the tax implications of their investments, including capital gains tax exposure and repatriation risks. The Act addresses these concerns by providing clear incentives for investors, including capital gains tax exemptions and guaranteed repatriation of investment proceeds .

What Is the Startup Label?

The Gateway to Incentives

The NSA introduces the Startup Label, issued by the National Information Technology Development Agency (NITDA), which is a prerequisite for enjoying the incentives available under the Act . The label is a certificate that recognises a company as a Startup, qualifying it for various benefits such as incentives, funding opportunities, and tax reliefs .

Eligibility Criteria for Startup Label

To obtain a Startup Label, a company must meet the following requirements :

Pre-Label Status

A pre-label status may be granted to entities registered as sole proprietorships or partnerships for a period of six months. This allows the entity time to convert to or re-register as a limited liability company and to meet the other requirements. Failure to meet the requirements within six months results in withdrawal of the pre-label status .

Validity and Renewal

Once granted, the Startup Label is valid for ten years from the date of issuance. During this period, the labelled startup must comply with the obligations under the Act to maintain its status .

Tax Incentives for Labelled Startups

1. Pioneer Status Incentive (PSI) with Expedited Process

One of the most attractive features of the NSA is its suite of tax incentives designed to encourage startup formation and sustainability . Labelled startups operating in eligible industries can apply through accelerated protocols via the Secretariat to the Nigerian Investment Promotion Commission (NIPC) for Pioneer Status Incentive .

Key Benefits:

• Exemption from Companies Income Tax for an initial period of three (3) years 

• Extension for an additional two (2) years if the entity still qualifies as a labelled startup 

• Total potential tax holiday of up to five years 

Important Notes:

The tax relief commencement date is the date of issuance of the startup label 

The exemption applies to income tax and any other tax chargeable on income or revenue 

Pioneer-status industries include information and communication, financial services, agriculture, trade, and other eligible sectors 

2. Exemption from Companies Income Tax

Generally, companies in Nigeria are liable to pay 30% tax on their income. However, to encourage the development and growth of startup companies, labelled startups are exempted from payment of income tax for a maximum period of five years—three years initially and renewable for an additional two years .

This exemption is a critical incentive for early-stage businesses as it allows them to reinvest significantly in their growth .

3. Research and Development (R&D) Tax Deductions

To encourage investment and innovation in R&D, labelled startups may claim tax deductions for expenses on R&D which are wholly incurred in Nigeria .

Key Features:

Full deduction of any expenses on research and development 

Expenses must be wholly incurred in Nigeria 

Restrictions placed by the Companies Income Tax Act shall not apply to a labelled startup 

This allows startups engaged in extensive capital-intensive research to protect their financial status during the development phase .

4. Reduced Withholding Tax (WHT) for Non-Resident Companies

Where a non-resident company provides technical, consulting, professional, or management services to a labelled startup, the income derived by such non-resident company is subject to Withholding Tax at a reduced rate of 5% .

Key Features:

Standard rate is 10% 

Reduced rate applies to services provided by non-resident companies to labelled startups 

Payment of the withholding tax is considered the final tax in respect of such income 

5. Exemption from Industrial Training Fund (ITF) Contributions

Enterprises with 25 employees on their payroll in Nigeria are mandated to contribute 1% of their total payroll to the Industrial Training Fund . However, labelled startups are exempted from this contribution where they provide in-house training to their employees for the period they remain designated as a labelled startup .

6. Exemption from Capital Gains Tax on Asset Disposal

To encourage long-term investment, the NSA provides that angel investors, venture capitalists, private equity firms, and other institutional investors who invest in labelled startups and hold their equity for a minimum of two years are exempted from paying Capital Gains Tax on the disposal of such investments .

Key Features:

• Exemption applies to gains accruing from the disposal of assets with respect to a labelled startup 

• Assets must have been held in Nigeria for a minimum of 24 months 

• Applies to angel investors, venture capitalists, private equity funds, accelerators, and incubators 

Investor Incentives Under the NSA

1. Investment Tax Credit

An investor in a labelled startup is entitled to a tax credit equivalent to 30% of the investment in the labelled startup .

Key Features:

Tax credit is equivalent to 30% of the investment 

Credit shall be applied on any gains on investment which are subject to tax 

The credit is applied against any taxable gains from the investment 

2. Capital Gains Tax Exemption

Capital gains tax shall not be charged on gains that accrue from the disposal of assets by an angel investor, venture capitalist, private equity fund, accelerator, or incubator with respect to a labelled startup, provided the assets have been held in Nigeria for a minimum of 24 months .

3. Guaranteed Repatriation of Investment Proceeds

Foreign investors are guaranteed repatriation of proceeds of their investment in a labelled startup in freely convertible currency .

Key Features:

Repatriation shall be through an authorised dealer 

Repatriation is subject to presentation of a Certificate of Capital Importation (CCI) 

The repatriation is net of all taxes 

Repatriation shall be at the Central Bank of Nigeria’s official exchange rate 

Funding and Financial Support

1. Startup Investment Seed Fund

The Act establishes the Startup Investment Seed Fund, to be managed by the Nigeria Sovereign Investment Authority (NSIA) . The fund is intended to provide early-stage finance to labelled startups, support for technology development, and grants for research and innovation .

Key Features:

The Act mandates an annual allocation of at least N10 billion to the fund 

The National Council for Digital Innovation and Entrepreneurship determines funding sources, management, and access to the fund 

An innovation grant framework is established to support research and development initiatives 

2. Credit Guarantee Scheme

The Act tasks NITDA with creating a Credit Guarantee Scheme to offer financial and credit assistance to labelled startups . This scheme reduces lenders’ risks in financing startups, enabling labelled startups to gain access to affordable credit .

3. Access to Grants and Loan Facilities

The Secretariat is mandated to ensure that labelled startup companies have access to grants and loan facilities provided by the Central Bank of Nigeria, Bank of Industry, or any other statutory bodies empowered to assist Small and Medium Scale Enterprises and entrepreneurs in Nigeria .

Regulatory Support and Non-Fiscal Incentives

1. Export Incentives and Financial Assistance

Labelled startups involved in the exportation of products and services deemed eligible under the Export (Incentives and Miscellaneous Provisions) Act are entitled to export incentives and financial assistance from the Export Development Fund, Export Expansion Grant, and the Export Adjustment Scheme Fund .

2. Technology Development Zones

The Act provides for collaboration between the Secretariat and the Nigeria Export Processing Zones Authority (NEPZA) to establish a Technology Development Zone to spur the growth and development of startups, accelerators, and incubators .

Incentives Available in Technology Development Zones:

Tax exemption under the NEPZA Act 

Non-applicability of the FX regime administered by the CBN 

Exemption from import duties 

Exemption from all federal, state, and local government taxes, levies, and rates 

3. Simplified Regulatory Processes

The Act establishes a Startup Portal, a one-stop platform for registration and investor-startup interactions . The Secretariat collaborates with various regulatory bodies to facilitate compliance and ease entry into local and international markets :

Corporate Affairs Commission (CAC): Designated section on the Startup Portal to facilitate seamless, expedited processes and transactions 

Intellectual Property: Collaboration with the Nigerian Copyright Commission and the Trademarks, Patent and Design Registries to ensure seamless and expedited registration and protection of intellectual property 

Technology Transfer: Collaboration with NOTAP to ease technology transfer registration for labelled startups, with discounts on all applicable fees 

Fintech: Collaboration with the CBN and SEC to ensure labelled startups operating as fintech companies have access to simplified licensing procedures 

Stock Exchange: The Secretariat will facilitate the process of a labelled startup that seeks to list on the Nigerian Exchange (NGX) and may grant incentives 

4. Regulatory Sandbox

The Act introduces sandbox programs that allow startups to test innovative products under relaxed regulations, creating an enabling environment for technology-driven businesses to thrive .

5. Intellectual Property Protections

The Act prioritises IP rights through strategic provisions that enhance protection, commercialisation, and global market penetration. A dedicated IP registration channel on the Startup Portal streamlines trademark and patent filings, allowing Nigerian startups to compete globally .

6. Innovation Hubs and Incubators

NITDA is mandated to collaborate with stakeholders in establishing innovation hubs and incubators. These hubs serve as collaboration, mentorship, and networking centres, equipping startups with the necessary resources to scale their ideas .

7. Dispute Resolution

The Act establishes an alternative dispute resolution mechanism and a specialised Start-Up Tribunal to handle conflicts, ensuring fair and efficient resolution of disputes affecting startups .

Compliance and Obligations for Labelled Startups

To maintain the Startup Label and continue enjoying the incentives, labelled startups have the following obligations :

Obligations:

Comply with extant laws governing businesses in Nigeria

Provide information on total assets and annual turnover achieved from the period the startup label was granted

Maintain proper books of accounts in line with reporting obligations under extant laws

Provide an annual report on incentives received and advancements made by virtue of the incentives

Consequences of Non-Compliance:

Where an entity granted a pre-label status fails to meet the requirements within six months, the pre-label status will be withdrawn 

The same applies to an entity that has obtained the Startup Label but fails to comply with the obligations of a labelled startup 

The label is valid for ten years, and compliance must be maintained throughout this period 

Implementation Status and Government Push

The Shift from Policy to Delivery

The Federal Government is moving to turn Nigeria’s Startup Act from a legal framework into practical funding, tax, export, and regulatory benefits for startups . More than 15 government institutions are being pushed to work together on implementation .

The Co-Creation Approach

At the Nigerian Startup Act (NSA) Incentives Activation Co-Creation Session in Abuja, organised by NITDA’s subsidiary, the Office for Nigerian Digital Innovation (ONDI), government agencies, private-sector players, and other stakeholders were brought together to remove institutional bottlenecks .

Key Implementation Structures

Some implementation structures are already in place :

Startup Consultative Forum and its governance framework

Digital startup support engagement portal

Improved startup labelling timelines

Startup Investment Seed Fund framework

Efforts to operationalise a regulatory sandbox

States are also being engaged on adopting the Startup Act

The Coordination Challenge

No single institution can deliver all the incentives alone. Implementation requires coordination across more than 15 government institutions . The government is now seeking clearer ownership of each incentive, simpler application procedures, and stronger monitoring systems .

How Qeeva Advisory Helps Startups Access Incentives

At Qeeva Advisory, we understand that navigating the Nigeria Startup Act 2022 and accessing its incentives can be complex. Our team of experienced professionals helps startups and investors understand the requirements, apply for the Startup Label, and maximise the available incentives.

Our Core Services

Advisory Services Nigeria – Our advisory professionals help you understand the Nigeria Startup Act 2022, determine eligibility for the Startup Label, and identify available incentives.

Tax Strategies and Planning – We help you structure your startup to optimise tax outcomes, claim available reliefs, and ensure compliance with the Act’s requirements.

Regulatory Compliance – We ensure your startup meets all regulatory requirements, including application for the Startup Label and ongoing compliance obligations.

Bookkeeping Services – Accurate records are essential for compliance and claiming incentives. Our bookkeeping services ensure your financial records are accurate and complete.

Risk Management – We help you identify and manage risks associated with startup operations, including compliance risks and tax exposure.

Frequently Asked Questions

Q: What is the Startup Label under the Nigeria Startup Act 2022?
A: The Startup Label is a certificate issued by NITDA that recognises a company as a Startup, qualifying it for various benefits such as incentives, funding opportunities, and tax reliefs .

Q: What are the eligibility criteria for obtaining a Startup Label?
A: To qualify, a startup must be registered as a limited liability company with the CAC, in existence for less than 10 years, focused on digital technology innovation, with at least 33% of its shares held by Nigerian founder(s) or co-founder(s) .

Q: What tax incentives are available to labelled startups?
A: Tax incentives include Pioneer Status Incentive (tax holiday for up to five years), exemption from Companies Income Tax, R&D tax deductions, reduced WHT for non-resident companies, and exemption from ITF contributions .

Q: What are the incentives for investors in labelled startups?
A: Investors are entitled to an investment tax credit of 30% of the investment, exemption from Capital Gains Tax on assets held for at least 24 months, and guaranteed repatriation of investment proceeds .

Q: How can labelled startups access funding under the Act?
A: The Act establishes the Startup Investment Seed Fund (with at least N10 billion annual allocation) managed by the NSIA, a Credit Guarantee Scheme, and access to grants and loan facilities from the CBN and Bank of Industry .

Q: What is the validity period of the Startup Label?
A: Once granted, the Startup Label is valid for ten years from the date of issuance .

Q: What is the Pioneer Status Incentive (PSI)?
A: PSI grants labelled startups a tax holiday—exemption from Companies Income Tax—for an initial three-year period, extendable for an additional two years .

Q: What is the regulatory sandbox under the Act?
A: The sandbox allows startups to test innovative products under relaxed regulations, creating an enabling environment for technology-driven businesses to thrive .

The Bottom Line

The Nigeria Startup Act 2022 represents a significant milestone for the Nigerian tech ecosystem, providing a comprehensive framework of tax, funding, and regulatory incentives designed to foster innovation, attract investment, and position Nigeria as a leading hub for digital entrepreneurship in Africa.

Key Takeaways:

Obtain the Startup Label: The Startup Label is the gateway to all incentives under the Act. Ensure your startup meets the eligibility criteria—limited liability company, less than 10 years old, focused on digital technology innovation, with at least 33% Nigerian ownership .

Maximise Tax Incentives: Claim the Pioneer Status Incentive (up to five years of tax holiday), R&D tax deductions, reduced WHT for non-resident services, and exemption from ITF contributions .

Access Funding: The Startup Investment Seed Fund, Credit Guarantee Scheme, and grants from statutory bodies provide critical early-stage finance and credit support .

Attract Investors: Investors benefit from a 30% investment tax credit, CGT exemption on assets held for 24 months, and guaranteed repatriation of investment proceeds .

Benefit from Regulatory Support: Simplified processes for CAC registration, IP protection, technology transfer, fintech licensing, and stock exchange listing reduce regulatory burdens .

Understand the Implementation Status: More than 15 government institutions are working together to deliver the Act’s incentives, and coordination is improving .

Maintain Compliance: Labelled startups must comply with extant laws, provide annual reports on assets and turnover, and maintain proper books of accounts .

Your job is to be prepared. Understand the requirements of the Nigeria Startup Act 2022. Apply for the Startup Label. Claim available incentives. Maintain compliance. Seek professional guidance.

With the right approach and the right partner, you can turn the Nigeria Startup Act 2022 from a legislative framework into a strategic advantage for your startup’s growth and success.

Suggested Reading from Our Blog

VAT Under The NTA 2025: What Digital Platforms And Fintechs Need To Know – Specific guidance for digital businesses and fintechs.

Tax Administration in Nigeria: NRS, JTB, TAT & Tax Reform Guide – Understand the new tax administration landscape under NTAA 2025.

Regulatory Compliance In Nigeria – Comprehensive overview of tax compliance requirements.

Tax Strategies and Planning – Structure your business to optimize your tax position.

Reference Links / Sources

Chambers and Partners – Tax Breaks & More: What the Nigerian Startup Act Offers – Analysis of Startup Label requirements, Pioneer Status Incentive, CGT exemption, R&D deductions, and Startup Investment Seed Fund 

Mondaq – Tax Breaks & More: What The Nigerian Startup Act Offers – Details on Startup Label criteria, PSI, CGT exemption, and R&D tax deductions 

BusinessDay – FG moves to turn Nigeria’s Startup Act into funding, tax and export gains for founders – Implementation push, 31 incentives across six categories, coordination across 15+ MDAs, NITDA’s role 

Mondaq – Obtaining A Startup Label Under The Nigeria Startup Act, 2022 – Detailed requirements for Startup Label, pre-label status, validity period, and compliance obligations 

ICAN Study Text – Nigeria Startup Act Incentives – Comprehensive coverage of Startup Investment Seed Fund (N10 billion), Credit Guarantee Scheme, PSI, ITF exemption, R&D deductions, reduced WHT, export incentives, and Technology Development Zones 

BusinessDay – The various tax and fiscal incentives for start-up companies in Nigeria – Exemption from CIT, R&D deductions, ITF exemption, Pioneer Status Incentive, and investor tax credits 

LinkedIn – Became a Labelled Startup under Nigeria Startup Act 2022 – Practical overview of key benefits including tax holidays, R&D deductions, and funding access 

NIALS Journal – Review of the Nigerian Startup Act 2022 – Academic analysis of tax exemption provisions, R&D deductions, ITF exemption, and export incentives 

Aluko & Oyebode – The Nigeria Startup Act 2022: Incentives for Startups – Investment tax credit (30%), CGT exemption, repatriation of investment, and Technology Development Zone incentives 

Mondaq – Fiscal Incentives Available To Startups Under The Startup Act, 2022 – Overview of startup labelling and fiscal incentives 

Kreston Pedabo – The Nigeria Startup Act 2022: Government Introduces New Tax Regime for Startups – Comprehensive coverage of PSI, CIT exemption, R&D deductions, reduced WHT, ITF exemption, CGT exemption, 30% tax credit, and repatriation guarantee 

Regfollower – Nigeria: President signs the startup act 2022 into law – Summary of tax incentives including PSI, R&D deductions, reduced WHT, ITF exemption, investment tax credit, and CGT exemption 

Vanguard – Why every tech founder must understand Nigeria start-up Act 2022 – Startup Label certification, tax incentives, funding access, Startup Investment Seed Fund, regulatory sandbox, IP protections, innovation hubs, and dispute resolution 

Mondaq – The Tech Startup Ecosystem Gets Long Awaited Nigeria Startup Act – Overview of the Act’s objectives, institutional framework, and policy intent 

Let’s Talk About Your Startup Incentives

Navigating the Nigeria Startup Act 2022 and accessing its incentives can be complex. At Qeeva Advisory, we understand the challenges faced by startups and investors in understanding eligibility requirements, applying for the Startup Label, and claiming available incentives.

Whether you need help with Startup Label application, tax planning, or compliance support, we are here to support you.

📞 Call us: (+234) 802 320 0801, (+234) 807 576 5799

📧 Email: info@qeeva.com

📍 Visit us: 5, Ishola Bello Close, Off Iyalla Street, Alausa, Ikeja, Lagos, Nigeria

Contact us today to schedule a consultation. Let us help you navigate startup incentives with confidence.

Your journey to startup success starts with a conversation. Let’s talk.