At the heart of the Nigeria Startup Act, enacted in October 2022, is the startup labelling process, which is a certification system that unlocks access to significant incentives and support mechanisms for qualifying technology ventures. Here’s everything you need to know about the Act, including how to get a start-up label.
Understanding the Nigeria Startup Act
The Nigeria Startup Act (an official copy is available here) is a landmark piece of legislation designed to position the country as Africa’s leading digital technology hub. The Act establishes the National Council for Digital Innovation and Entrepreneurship, which will be chaired by the President, with the Vice President serving as Vice-Chairman.
The aim of the legislation is to provide a legal and institutional framework for start-up development, create an enabling environment for technology ventures, develop technology-related talent and establish Nigeria as a centre of innovation with skilled professionals capable of competing globally.
Most importantly, the Act applies specifically to companies incorporated under the Companies and Allied Matters Act that receive the startup label, as well as organizations whose activities affect the creation, support and incubation of labelled startups.
What Is a Startup Label?
A startup label is essentially a digital certificate issued by the Secretariat, as operated by the National Information Technology Development Agency, to qualifying startups. This certification serves as a gateway to numerous fiscal incentives, regulatory support and access to funding opportunities that can dramatically improve your startup’s financial runway and growth trajectory.
The label remains valid for 10 years from the date of issuance, thus, providing a substantial window during which startups can leverage the benefits of official recognition. However, the label isn’t a set-it-and-forget-it arrangement, startups must continuously meet eligibility criteria, file periodic reports, maintain minimum employment levels and demonstrate ongoing innovation throughout this 10-year period.
Eligibility Requirements
Before pursuing a startup label, the first thing is to understand whether your venture meets the eligibility criteria. The Act establishes clear requirements that balance accessibility with the need to ensure genuine innovation-focused companies benefit from the framework.
1. To qualify for labelling, your startup must be registered as a limited liability company under the Companies and Allied Matters Act and have been in existence for no more than 10 years from incorporation.
2. Your company’s objectives must centre on innovation, development, production, improvement and commercialization of digital technology innovative products or processes.
3. You must be a holder or repository of a product or process of digital technology, or the owner or author of registered software.
4. One or more Nigerians must hold at least one-third of the local shareholding in your start-up, as founders or co-founders.
The Act explicitly excludes holding companies or subsidiaries of existing companies not registered as startups to serve as a way of preventing established corporations from exploiting benefits intended for emerging ventures.
Special Provisions for Sole Proprietorships and Partnerships
Recognizing that many early-stage ventures begin as sole proprietorships or partnerships, the Act provides a pathway for these entities. If you operate as a sole proprietorship or partnership and meet the innovation, technology, and ownership requirements, you can receive a “pre-label status” for six months. This grace period allows you to incorporate as a limited liability company while still accessing some benefits. However, failure to incorporate within this timeframe results in loss of the pre-label status.
The Labelling Process
Once you’ve confirmed your eligibility, the actual labelling process is designed to be straightforward and accessible through the Startup Support and Engagement Portal. The portal is a digital platform created specifically to streamline interactions between startups and government agencies. It is available at https://startup.gov.ng/.
1. First, you’ll submit an application through the Startup Portal in the prescribed form. The portal serves as your central interface for all interactions related to the labelling process and subsequent benefits. You’ll need to provide supporting documents as prescribed by the Secretariat. While the Act doesn’t specify exact documentation requirements, expect to provide incorporation documents, evidence of your technology or intellectual property, shareholder information, and details about your innovative products or processes.
2. The Coordinator of the Startup Portal, an appointed official with at least ten years of experience in technology and entrepreneurship, reviews your applications.
3. When satisfied that you’ve met all requirements, the Coordinator, with the Secretariat’s approval, enters your startup’s name and particulars in the official register of startups and issues your startup label.
4. The labelling certificate issued to you serves as a conclusive evidence that you’ve complied with all requirements and been duly labelled according to the Act, unless proven otherwise.
Obligations of Labelled Startups
Receiving a startup label comes with responsibilities.
1. Labelled startups must comply with all existing laws governing businesses in Nigeria.
2. Labelled startups must provide annual information on human resources, total assets, and annual turnover achieved since receiving the label. This allows the government to track the program’s impact.
3. They must maintain proper accounting books in accordance with existing reporting obligations and provide annual reports on incentives received and advancements made through those incentives. This accountability ensures transparency and helps evaluate the program’s effectiveness.
4. If your startup undergoes changes in structure, composition or objectives, you must notify the Coordinator within one month. This requirement ensures the register remains current and that you continue meeting eligibility criteria.
Failure to meet these obligations triggers a notification from the Coordinator, who, according to the Act, will give you 30 days to rectify the default. If you fail to do so, the Secretariat may withdraw your startup label and notify relevant agencies or investors that have granted incentives.
Why Get Labelled?
The true value of obtaining a startup label lies in the comprehensive incentive package the Act establishes. These benefits span tax relief, access to funding, regulatory support and intellectual property protection.
Corporate Income Tax Relief
Labelled startups qualifying under the Nigeria Startup Act enjoy up to a three-year corporate income tax holiday, extendable by another two years if performance benchmarks are met. During this five-year maximum period, your startup pays no corporate income tax whatsoever! However, after the exemption period ends, your tax rate depends on company size:
- Micro Company (Annual turnover less than ₦25 million): 0%
- Small Company (₦25 million – ₦100 million): 20%
- Medium & Large Companies (Above ₦100 million): 30%
This tiered structure means a small startup earning ₦40 million annually would pay ₦8 million in corporate tax after its exemption period, while a micro startup remains fully exempt. For context, if your startup reaches ₦90 million in annual turnover during year six, you’d pay ₦18 million in taxes.
Additional Tax Reliefs and Deductions
Beyond the corporate tax holiday, the Act provides several additional fiscal benefits. Labelled startups enjoy full deduction of research and development expenses that are wholly incurred in Nigeria, without the restrictions typically imposed by the Companies Income Tax Act. The Nigeria Tax Act 2025 enhances this further and allows a 120% deduction on qualifying R&D expenses directly connected to your core business.
For example, a fintech startup spending ₦5 million on developing a new payment system could deduct ₦6 million (₦5 million × 120%) from its taxable income. This super-deduction effectively reduces your tax bill while incentivizing continued innovation.
Additionally, the government provides import duty and VAT exemptions on equipment, software, and tools brought into Nigeria for innovation and R&D. This provision eliminates the 5–10% import duty that would ordinarily apply, significantly lowering the entry cost of technology infrastructure.
Withholding Tax Benefits
Ordinarily, businesses in Nigeria must withhold 5% to 10% on payments for professional, contract, or management services. The Act provides relief here as well: non-resident companies providing technical, consulting, professional, or management services to a labelled startup face only a five percent withholding tax on income derived from such services, with this being their final tax obligation. This makes it easier and more cost-effective to engage international expertise.
Labelled startups can also enjoy withholding tax exemptions for qualifying transactions during their tax holiday, freeing up critical cash flow during early growth stages.
Value Added Tax Considerations
VAT remains at 7.5%, but startups earning less than ₦25 million per year are exempt from VAT registration and filing. Once your annual turnover exceeds that threshold, you must begin charging, collecting and remitting VAT monthly. Importantly, VAT does not apply to equity investments, only to goods and services sold.
Loss Carry-Forward Provisions
One of the most significant advantages for labelled startups is the extended loss carry-forward rule. While regular companies can carry tax losses forward for four years, startups with the label can extend this to eight years. This means that even if you remain unprofitable through your growth phase, your early losses can still be offset against future profits long after your company stabilizes.
For example, if your startup loses ₦20 million in its first three years combined, then becomes profitable in year five earning ₦30 million, you can offset those earlier losses against your current profits, dramatically reducing your tax burden during the crucial transition to profitability.
Payroll Tax Incentives
Once you start hiring, standard payroll obligations apply:
- PAYE (Personal Income Tax): Graduated rates from 7% to 24% depending on income level
- Pension Contributions: 10% by employer, 8% by employee
- National Housing Fund (NHF): 2.5% of employee’s basic salary
- National Health Insurance Scheme (NHIS): Typically 10% of gross salary by employer, 5% by employee
However, the startup label carries a 5% payroll tax credit for companies that hire and train young Nigerians under certified skill development programs. If your startup is exempted from Industrial Training Fund contributions during the period, you still hold a labelled startup designation, as long as you provide in-house training to employees.
Investment Incentives
The Act establishes the Startup Investment Seed Fund, which is managed by the Nigeria Sovereign Investment Authority, with annual funding of at least ₦10 billion (approximately $6.5 million at current exchange rates). This fund provides early-stage finance to labelled startups and relief to technology laboratories, accelerators, incubators, and hubs.
A Credit Guarantee Scheme provides accessible financial support, creates credit guarantee frameworks, and offers financial management capacity building. Significantly, the scheme recognizes intellectual property, assigned shares, and other instruments as sufficient collateral.
Also, labelled startups gain access to grants and loan facilities administered by the Central Bank of Nigeria, Bank of Industry, and other bodies supporting small and medium enterprises.
Investor Incentives
To encourage investment in labelled startups, the Act provides substantial incentives for investors. Angel investors, venture capitalists, private equity funds, accelerators and incubators investing in your labelled startup receive an investment tax credit equivalent to thirty percent of their investment, applicable to taxable gains.
The government exempts investors from capital gains tax on asset disposals related to a labelled startup when they hold those assets in Nigeria for at least twenty-four months. This rule attracts long-term, patient capital into the ecosystem and rewards investors who support genuine growth rather than short-term speculation.
In practice, these provisions make startup equity far more appealing to institutional and foreign investors who often worry about double taxation or thin exits. An angel investor putting ₦10 million into your startup receives a ₦3 million tax credit and pays no capital gains tax on any returns if they hold their shares for two years.
Economic Development Tax Incentive Certificates (EDTIC)
Startups operating in priority sectors such as renewable energy, agritech, healthtech, or edtech can apply for additional tax credits of 10%–15% of qualifying expenses through Economic Development Tax Incentive Certificates (EDTIC), depending on verified impact metrics. The application process requires demonstrating how your startup’s activities align with national development priorities. While this involves additional paperwork, the tax benefits can be substantial for qualifying companies.
Export Facilities and International Support
For startups engaged in exports, the Secretariat ensures that labelled startups involved in exportation of products and services deemed eligible under the Export (Incentives and Miscellaneous Provisions) Act receive export incentives and financial assistance from the Export Development Fund, Export Expansion Grant, and Export Adjustment Scheme Fund.
The Secretariat works with the CBN to guarantee that foreign investors can repatriate their investment through the CBN’s authorized dealers in freely convertible currency. This covers dividends, profits, and proceeds from sales or liquidation at official exchange rates when investors inject their initial funds through proper channels using a Certificate of Capital Importation (CCI).
Regulatory Support and Facilitation
The Secretariat collaborates with the Corporate Affairs Commission to create a dedicated section on the Startup Portal, streamlining processes for transactions labelled startups conduct with the Commission. Similar arrangements exist with the Nigerian Copyright Commission and the Trademarks, Patent and Design Registries for intellectual property registration and protection.
These agencies are mandated to:
- Designate separate sections on the Startup Portal to ease registration
- Provide assistance for patent applications and infringement actions
- Facilitate filing and registration of trademarks and patents at the international level
- Ensure registration processes are seamless and expedited
The Act requires the Secretariat, Central Bank of Nigeria and Securities and Exchange Commission to collaborate on easing licensing procedures for fintech startups. These regulators must consult startups before they issue new regulations that affect them.
Also, labelled startups can participate in regulatory sandboxes, for instance, testing environments created by the CBN, SEC, and other regulators, through fast-track application processes via the Startup Portal. This allows you to test innovative products in controlled environments before full market launch.
Crowdfunding and Capital Raising
Startups may raise funds through crowdfunding intermediaries and commodities investment platforms duly licensed by the Securities and Exchange Commission, with these platforms available through the Startup Portal. The Council provides recommendations to SEC to fast-track crowdfunding processes for labelled startups.
Stock Exchange Listing Support
The Council assists labelled startups seeking to list on the relevant board of the Nigerian Exchange Limited (NGX) or similar exchanges, helping them meet eligibility requirements and granting incentives that aid growth and development.
The Startup Consultative Forum
The Startup Consultative Forum provides a platform for information sharing and collaboration among labelled startups, venture capitalists, angel investors, incubators, accelerators, innovation hubs and civil society organizations.
