DUTY EXEMPTION IN NIGERIA: HOW TO PROCESS IT

Duty exemption in Nigeria or import duty exemption in Nigeria is indeed a good incentive from the government. What really is import duty exemption in Nigeria? Are all imports qualified for duty exemption? If not all products are suitable for import duty exemption, what products are? How can you process duty waiver for suitable goods in Nigeria?

This article will address all questions on import duty exemption in Nigeria. We will demonstrate how duty waiver work with examples. Therefore, we urge you to read the below paragraphs carefully. Feel free to contact us today for smooth cargo handling and documentation in Nigeria and beyond.

GUIDELINES FOR ACCESSING OF IMPORT DUTY EXEMPTION IN NIGERIA AND REFUNDS OF CUSTOM DUTY

The Federal Ministry of Finance is responsible for the administration of Fiscal Incentives i.e. issuance of Import Duty Exemption Certificate (IDEC) for items exempted from the payment of duties, levies and other forms of taxes which are in accordance with the provisions of extant relevant statutes and International Agreements or Protocols.

The lists of existing items for which the Ministry grants fiscal incentives are as follows:

MILITARY AND PARAMILITARY ITEMS AND ARMS

Goods obtained free as technical assistance from donor international bodies/countries.
Life Saving Appliances.
Military Hardware and Uniforms: this includes all hardware imported officially for the use of the Nigerian Army.
Additionally, hardware by Nigerian Navy or the Nigerian Air Force is also exempt. However, alcoholic and non-alcoholic drinks, tobacco goods and products of food industry and as appropriate, any parts of such goods are not applicable.
Equally, Accoutrements and Uniforms, the property of Officers of the Nigerian Army all exempt.
Again, the Nigerian Navy, the Nigerian Air Force, Nigerian Police, Nigeria Customs Service and other para-military services imported by such officers for their PERSONAL USE ON DUTY as required by the regulations of their respective services.
Arms and Ammunition imported by the Nigeria Police Force, Nigeria Customs Service and other para-military services.

MACHINERY AND EQUIPMENT FOR POWER

All machinery imported by industrial establishment engaged in the exploration, re-injection, processing and power generation through the utilization of Nigerian natural gas for their operations.
All shipment of materials, machineries, plant, materials and equipment for the Nigeria LNG Project are exempt from payment of import duty, Value-Added Tax, Pre-shipment inspection and other port charges.
LNG Company and its Contractors/Sub-contractors are exempt from the payment of import duties and other duties, including but not limited, to port surcharges in respect of necessary imports on plant, machinery, equipment and materials for use in the construction of/or incorporation in plant, jetties, shipping, transmission facilities and all ancillary works in the company’s operations
Plant, machinery and equipment purchased for utilization of gas in downstream petroleum operations.

FREE ZONE GOODS

All Approved Enterprises within the Export Free Zone are exempt from all Federal, State and Local Government Taxes, Levies and Rates.
Furthermore, the Authority and any approved Enterprise shall be entitled to import into the Export Free Zone, free of customs duty any capital goods, consumer goods, raw materials, components or articles intended to be used for the purposes of and in connection with an approved activity, including any article for the construction, alteration, reconstruction, extension or repair of premises in the Export Free Zone or for equipping such premises
Plant and machinery imported for use in the Export Processing Zone or Free Trade Zone.

MINING EQUIPMENT AND PARTS

All operators in the mining industry are exemption from payment of customs and import duties in respect of plant, machinery, equipment and accessories imported specifically and exclusively for mining operations subject to the approval of the appropriate plant, machinery, equipment and accessories by the Mines Inspectorate Department.
All Infrastructural and Social Support Programs under the World Bank, ADB and other Multilateral Institutions for Assisted States Water, Health, Urban Renewal and Agricultural Projects and other Priority Projects where the Contract Agreement did not include the cost of Import Duties shall be exempt from payment of import duties.
All government officials who spend at least six months abroad on official assignment are entitled to concessionary rebate of 50% on personal car and duty exempt in respect of their personal effects.
All Machineries and Equipment under Chapters 84, 85 and 90 of the Common External Tariff (CET) for Agriculture, Cement, Hospitality, Iron and Steel (Cold-Rolled), and Textile Industries and Chapter 88 for Aviation are exempted from payment of import duty

AGRICULTURAL MACHINES

Tractors, Ploughs, agricultural equipment and implements purchased for agricultural purposes.
Fertilizer, locally produced Agricultural and veterinary medicine, farming machinery and farming transportation equipment

OTHER GOODS EXEMPT

All medical and pharmaceutical products.
Basic foods items.
Books and educational materials.
Baby products.
All exports

SERVICES EXEMPT

Medical services
Services rendered by community Banks, People Banks and Mortgage institutions.
Plays and performances conducted by educational institutions as part of learning.
All exported services

GENERAL CONDITIONS TO DUTY EXEMPTION IN NIGERIA

All requests for exemption from payment of Import Duty shall have the following documentation:

Proforma Invoice indicating quantity, value and description of items;
Bill of Lading/Airway Bill;
Comprehensive list of items to be imported;
Letter of donation (where applicable);
Certificate of Registration (where applicable);
Contract Agreement (Where applicable);
Shipping Manifest (where applicable)
List of imported items must be endorsed/certified and authenticated by the applicant/beneficiary.

DUTY EXEMPTION: SPECIFIC CONDITIONS FOR DONATIONS, DIPLOMATIC IMPORTATION AND OTHER REQUESTS

All requests in respect of donated items by International Organizations, Countries or Bodies, such applicants or beneficiary (recipient of the donated item), shall in addition to the General Conditions specified above, comply with the following requirement:

Since all International Donor Countries, Agencies and Organizations had signed Working Agreement with the National Planning Commission, all requests from such donors must be accompanied with the Agreement;
All requests from Christian Organizations should be forwarded to this Ministry through the Christian Association of Nigeria (CAN) or any relevant supervisory body;
All requests from Islamic Organizations should be channeled through the Jama’atu Nasrul Islam (JNI) or other relevant supervisory body;
All potential applicants that are Non-Governmental/Voluntary Organizations must submit certification of such registration obtainable from the National Planning Commission;
The recipient must be technically qualified to receive donation. Where the applicant or recipient is an NGO, such must be a non-profit organization duly registered by the Corporate Affairs Commission under the Land Perpetual Act (Part C) Provision of the Companies and Allied Matters Decree (this section clearly define whether the organization is a limited liability company for commercial purposes or a non-profit organization);
All requests for exemption in respect of Drugs whether donated or otherwise must be accompanied by certification of the Federal Ministry of Health regarding the safety of its usage in Nigeria;
Organizations registered as Limited Liability are not qualified to receive donation and therefore not qualified for Duty Exemption;
Certificate of donation from the donor to the recipient will indicate that the goods are actually donated;

ADDITIONALLY:

Bill of Lading/Airway Bill – this will indicate the donor as the “Shipper” while the recipient as “Consignee”. Under normal circumstances, the “Shipper” and the “Consignee” are not the same. When this happens, the application appears fraudulent and rejected. Exemption to this provision is when such organization have international spread such that the parent body donate to its local partner in Nigeria for instance, International Planned Parenthood Federation, Red Cross, Rotary, Society for Family Health, Africare etc.;
The applicant (recipient) must provide an explanation on the mode of utilizing the donated goods for the benefit of Nigerians in its immediate area of focus;

DUTY EXEMPTION: SPECIFIC CONDITIONS IN RESPECT OF GAS UTILIZATION PROJECTS (UPSTREAM & DOWNSTREAM), FERTILISER, CEMENT, TEXTILE AND POWER

Gas Sale and Purchase Agreement between supplier and consumer (applicable to companies converting to the use of Natural Gas to power machineries for their operations (fertilizer, Gas-Based Power Plants etc.).
NNPC’s approval for the Award of Contract in respect of new gas projects by major oil and Gas Company e.g. Chevron, Elf, NAOC, Shell and ExxonMobil etc. (applicable to Upstream only).
NNPC to confirm cost of duty payment in respect of imported machinery and equipment for gas development has not been included in recovered whether in respect of JV & PSC Gas Projects.
Contract Agreement between the oil company and its contractors (applicable) to new gas projects in the Upstream).
Similarly, seek the confirmation of the Gas Supply and Purchase Commitment from the existing Gas Suppliers (Nigerian Gas Company, Shell Nigeria Company etc.) applicable to gas.
Equally, statement on the proposed utilization of the gas purchased. Company must explain the quantity of the Gas to consumable, level of power to generate (in Watts, Kilowatts, and Megawatts etc.).

FURTHERMORE;

For companies converting their operations to run on natural gas or use gas to generate power whether for Stand Alone Power Projects or for National Grid, shall state cost and benefit of their current status as compared with the post conversion/project period. These Key Performance Indicators is also applicable to the other applicants (Cement. Hospitality, Iron & Steel (Cold-Rolled), Agriculture and Textile).

Level of capacity before incentive compared with level of capacity after incentive
Level of turnover before incentive compared with level of turnover after incent
Level of Profitability before incentive against Level of Profitability after
Level of Tax commitment before incentive versus Level of Tax commitment after
Level of actual tax payment before incentive versus Level of potential tax payment after
Level of direct and indirect employment before and after incentive.

DUTY EXEMPTION: SPECIFIC CONDITIONS IN RESPECT OF WORLD BANK, ADB. AND MULTILATERAL INSTITUTIONS

Assisted State Health, Water, Agricultural, Educational Etc. Projects In addition to General Requirement, and all requests for Sectoral Development Assisted Projects of the World Bank, ADB, and Multilateral Institutions’ for State Assisted Health, Water/Sanitation, Agriculture, Education etc., shall be with the following additional documentation:

Signed Loan Agreement between the State and the Multilateral Institution supporting the project
Contract Agreement between the State Government and the Contractor handling the Project. This will show whether the project is actually World Bank /ADB Assisted as claimed or is a direct purchase by the applicant which renders the application liable for rejection
The Contract Agreement will enable the office determine whether the cost of Import Duty is included in the total contract sum.

DUTY EXEMPTION: SPECIFIC CONDITIONS FOR PUBLIC OFFICERS RETURNING FROM MISSIONS/EDUCATIONAL TOUR

In addition to the General Requirement, all requests for Duty Rebate by Foreign Affairs Staff/Other Public Officers returning from Foreign Missions or Educational Tour shall fulfill the following additional criteria:

Copy of Stamped Passport of Applicant;
Copy of the Entry visa to show that the applicant was actually out of the Country;
Officer must have stayed for a minimum period of six (6) months;
Officer must be finally returning back to Nigeria

IMPORT DUTY EXEMPTION: SPECIFIC CONDITIONS FOR GOVERNMENT CONTRACTORS (SECURITY EQUIPMENT)

In addition to the General Requirement, all requests for Import Duty Exemption for Security Equipment supplies, i.e. arms, ammunition and military hardware by contractors must be with copies of the contract Agreement.

DUTY EXEMPTION: CONDITIONS ON THE UTILIZATION OF THE APPROVED EXEMPTION CERTIFICATE

The resultant Import Duty Exemption Certificate granted upon approval of the Honorable Minister of Finance shall be valid for a period of one (1) calendar year. The effective date of the resultant certificate should be the date of arrival of the items (as provided in the Way Bill/Bill of Lading);
The utilization of resultant certificate to import and clear the items should be within the one (1) year validity period. Notify the Office immediately a beneficiary notices that due to some unforeseen challenges, the import of the items so approved cannot be within the period, which will then trigger requests for revalidation.
Evidence of utilization must accompany all requests for revalidation i.e. Jacking List duly entered and stamped by the Customs Service, List of Outstanding Items to be imported and full statement on why the utilization of the incentive within the validity period of the Certificate is impossible.
Also, in the event of request for revalidation, applicants should ensure that the outstanding list of items to be imported should be consistent with the original list subject to reduction in value and quantity;
Monitoring of all Import Duty Exemption Certificates issued on quarterly basis to ensure that the compliance with deliverables indicated prior to the approval.

DUTY EXEMPTION: PROCESSING OF IMPORT DUTY REFUNDS

Refunds of import duty to importers often arise because of three (3) obvious reasons as well as some less obvious ones. Main factors are-

Importers who are technically qualified as beneficiary of import duty exemption certificate but compelled to pay duty on the imported items having stayed at the ports while awaiting for the resultant IDEC to be issued. In such cases, the beneficiary could make request for refunds after having been issued with the IDEC and that the items had arrived within the validity period of the IDEC;
Assessed Customs duties are payable to the customs area commands (Ports) where goods have been imported. Apapa Command must have assessed an importer whose goods were destined for example Apapa and the resultant duty payable to the Command. However, if there is a transfer of the goods to Tin Can Port due to unforeseen reasons, the importer is thus required to pay duty now assessed by Tin Can Command, thereby paying such duty twice. The importer is thus qualified to seek for refunds of the duty earlier paid.
Where an importer pays customs duty, but the there is no Importation because of cancellation from both parties. The duty already paid is therefore refundable.

GENERAL CONDITIONS TO FULFILL FOR DUTY REFUNDS

All requests for refunds of import duty must be initiated from the Customs Area Commands where the duty been reclaimed has been paid. This will then be forwarded to the Customs Headquarters where an In-House Committee of the NCS would review such claims and where confirmed in line with the customs guidelines for refunds, the Committee’s recommendation is further commended by the Comptroller-General of the NCS for the consideration and approval of the Minister of Finance;
The Customs recommendation is forwarded with the relevant file of the transaction wherein the following documentation must be found:-

Customs Pay-in forms indicating the actual amount paid
Customs Payment Receipt to confirm actual payment made this also indicates the Collecting Bank through which the payment was made
Bill of Lading and Clean Report of Inspection (CRI) will indicate the arrival date of the items (whether the items arrive within the validity period of the certificate in the case where the applicant was issued with IDEC)
Copy of Form ‘M’ indicative of the genuineness of the transaction
Letter of Credits opened where applicable
The Bill of Lading, Form ‘M’ and Shipping Manifest will confirm the description and value of item as well as amount of duty payable on the transaction.

MORE SO ON CONDITIONS TO FULFILL FOR DUTY REFUND

Upon the receipt of the recommendation from the Nigeria Customs Service, there is need to:-

Verify that the applicant was actually granted IDEC if applicable
Ascertain the reason why duty was paid while IDEC has been issued by cross checking the dates of IDEC application, approval and effective date of the IDEC
in cases of refunds due to an earlier IDEC, only the cost for duty and VAT paid are calculated as amount refundable given that only these two are usually conceded under normal circumstance while payments for 7% Surcharges, Fees and other levies are paid even with an IDEC
The Central Bank of Nigeria is then requested to confirm whether such payments as claimed by the applicant have been made through the account of the Designated Collecting Bank
In cases of refunds claim arising from excess duty payment, verify the applicable tariff classification

The amount actually paid reflected in the CBN’s confirmation should be lower than claimed, as the collecting bank through which the duty was paid must have deducted its Commission of 2 per cent COT since it has provided service by collecting from the importer and remitting to the CBN.
Having satisfied the eligibility criteria, request is recommended for the Honorable Minister of Finance’s consideration and approval;
Upon the Ministerial approval, the letter conveying such approvals will go to the Office of the Accountant General of the Federation to effect payment in favor of the beneficiary.

IMPORT DUTY EXEMPTION IN NIGERIA : PROCESSING FEES:

Application for duty exemption requires Sixty Thousand Naira only, Non-refundable Administrative fees.
Five percent surcharge of the total value of the amount conceded is payable after approval.
All Applicants shall receive real time notification on the status of their application within 24 hours from receipt of their application, through e-mail. Applications that meet the required conditions with evidence of payment of the applicable administrative processing fee is within a period of five (5) working days.

IMPORT DUTY EXEMPTION IN NIGERIA OR IDEC: A CASE STUDY OF LPG GAS FLOWMETER

In this section, we will demonstrate how to determine import duty exemption in Nigeria. Consequently, we will be showing how to obtain the Import Duty Exemption Certificate – IDEC. The following paragraphs will show a demonstration of a typical job request from one of our client. Thus, we will begin with the offer from the client, and our response. Feel free to click our contact us page for smart handling of your IDEC.

Our client writes:

Dear Vagmon,

We have need to obtain import duty exemption in Nigeria, for our product – gas flowmeter, which we intend to use in our LNG plant. Our plant is in Lagos, we are an LNG and LPG production and refining company. Kindly see the information below and advise us cost and complete requirement for your handling on our behalf.

Goods description – Gas Flowmeter

Invoice Value – USD281700.00

HSCODE: 9028100000.

Our response is as captured in the following subheadings and paragraphs.

IDEC TAILORED REQUIREMENT FOR GAS FLOWMETER

Application letter.
Proforma invoice.
Form M (if you have).
CAC documents (we can extract that from your previous application).
Tax clearance certificate 2023.
Gas sales purchase agreement.
Support letter from NNPCL or ministry of petroleum resources.

ESTIMATE COST FOR THE GAS FLOWMETER CASE STUDY

We shall base all calculations below on 10% HSCODE – 9028100000 without VAT USD281700, which is equivalent to NGN166048065 (NGN589.45: USD1).

10% estimate waived amount for import duty – NGN16604806.5

7% estimated waived amount for port charges – NGN1162336.50

Total estimated waived amount – NGN17767143

IMPORTING OR EXPORTING TO NIGERIA?
-PRICE VERIFICATION SYSTEM (PVS)
-SON PC/SONCAP PROCESSING
-FORM M AND PAAR PROCESSING
-INVOICE, CCVO, PACKING LIST, AND OTHER DOCS
-PICKUP AND SHIPPING
-SEAFRIEGHT CLEARANCE AND DELIVERY TO FINAL DESTINATION
-AIR CARGO CLEARANCE AND DELIVERY
CONTACT US:
+2349075526276 (CALL/WHATSAPP)
info@clearingandforwardingnigeria.com
fanigray@gmail.com
twitter: @vagmonint
WeChat ID: wxid_d75k5efr8hon22

5% waived amount to government NGN888357.15

Application fee – NGN60000

TAXES PAYABLE ON SHIPMENT ARRIVAL:

ETLS is 0.5% of the CIF (cost, insurance and freight)

CISS is 1% of the goods value – NGN1660480.65

Consultation charges from our end is negotiable, and as agreed.

Processing timeline:

3 weeks – 4 weeks for Support Letter
2 weeks – 3 weeks maximum for IDEC.

Read also: CUSTOMS DUTY – WHAT IS THE MEANING?

IMPORT DUTY EXEMPTION IN NIGERIA OR IDEC: A CASE STUDY OF CATRIDGES OF NUCLEAR REACTORS FOR OIL EXPLORATION INDUSTRY

In this example, we assume that the ministry of finance is willing to grant waiver for duty, VAT, as well as port charges.

CIF USD3.5m – NGN2063075000.00

HSCODE – 2844500000 (duty rate 5%, 7.5% VAT)

Estimated import duty (to be waived) – NGN103153750.00

Estimated port charges = NGN27851512.50

VAT – NGN164556019.69

Total waived amount = NGN295561282.00

5% waived amount to government NGN14778064.00