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TAX BREAKS & MORE: WHAT THE NIGERIAN STARTUP ACT OFFERS

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BY ADERONKE ALEX-ADEDIPE AND OMODELE FATODU

Introduction

The Nigerian Startup Act 2022 (NSA) is a significant piece of legislation, designed to foster innovation, attract investment, and create a favourable business climate for tech-enabled startups in Nigeria. It aims to position Nigeria as a leading hub for digital entrepreneurship in Africa by removing regulatory barriers and offering targeted incentives.

This newsletter explores key incentives available under the NSA and what they mean for startups and investors.

The Startup Label: A 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 NSA. To qualify, a startup must:

  • Be registered as a limited liability company with the CAC, and in operation for less than 10 years.
  • Have its objects focused on innovation, development, production, or improvement of a digital product, service or process
  • Have at least 33% of its shares held by a Nigerian founder or co-founder
  • Be certified by NITDA via the Startup Portal

Only Labelled startups may benefit from the incentives discussed below.

  1. TAX AND FISCAL INCENTIVES

One of the most attractive features of the NSA is its suite of tax incentives designed to encourage startup formation and sustainability:

  1. Pioneer Status Incentive (PSI) – The NSA allows for a Labelled startup to apply for PSI which grants an initial three-year tax holiday, extendable for an additional two years. This exemption from Companies Income Tax is a critical incentive for early-stage businesses as it allows them to reinvest significantly in their growth.
  2. Exemption from Capital Gains Tax – 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.
  3. Tax deductions for Investments in Research & Development (R&D) – 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 and restrictions placed by the Companies Income Tax Act shall not apply.
  4. Access to the Startup Investment Seed Fund – The NSA 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.
  1. REGULATORY SUPPORT AND EASE OF DOING BUSINESS

The NSA introduces measures to reduce regulatory friction:

  1. Regulatory Sandboxes – The NSA empowers regulatory authorities (such as the Naional Insurance Commission (NAICOM), CBN or SEC)  to introduce sandbox programs that allow Labelled Startups to test innovative products or services in a controlled environment without the full burden of regulatory compliance.
  2. Fast-Tracked Approvals and Support – Labelled startups may request expedited approvals, waivers, or forbearances from regulators where traditional compliance requirements are unduly burdensome or incompatible with digital innovation. The NSA requires regulators to consider such requests and respond promptly through designated innovation desks.
  3. Single Window Platform – the NSA mandates the creation of a single platform to streamline startup registration, compliance, and access to government programs which help reduce bureaucratic delays.
  1. CAPACITY DEVELOPMENT AND TALENT SUPPORT

The NSA mandates collaboration between the Federal Government, academic institutions, and the private sector to promote digital training programs, tech-focused curriculum, and upskilling in areas like AI, cybersecurity, and blockchain. Labelled startups may benefit from access to trained talent pools at lower cost.

  1. INTELLECTUAL PROPERTY AND COMMERCIALISATION SUPPORT

The NSA encourages simplified processes for IP registration. Labelled Startups are eligible for reduced fees and technical support in registering trademarks, patents, and copyrights with the National Office for Technology Acquisition and Promotion and the Trademarks, Patents and Designs Registry.

Conclusion

The NSA is a forward-thinking legislative framework that provides critical incentives to drive innovation and entrepreneurship. However, these incentives are contingent on obtaining the Startup Label and remaining compliant with the NSA’s requirements. As the implementation of the NSA continues, stakeholders are encouraged to engage actively with the Startup Portal, monitor new guidelines from NITDA and NSIA, and seek legal advice to ensure eligibility and access to full benefits.

PROTECTION AND ENFORCEMENT OF TRADEMARK RIGHTS IN NIGERIA

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By Aderonke Alex-Adedipe and Feyijuwa Akinyanmi

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Trademarks are unique marks or a combination of marks used to distinguish the goods or services offered by a business. Trademarks of successful businesses are often subject to infringement by competitors attempting to exploit their good will. It is therefore important for businesses to take necessary steps to protect their trademark and enforce them when the need arises.

In our previous article, we discussed the procedure for registration of trademarks, as it is the most important protection which the law provides to trademarks. Notwithstanding this protection, infringement may still occur. In such instances, an owner of a registered trademark may seek to enforce its rights. Today’s newsletter will briefly highlight what amounts to trademark infringement as well as procedures for enforcement.

Infringement of Trademark

Proprietors of registered trademarks have the exclusive right to use their trademarks in connection to the classes of goods and services under which they are registered and the right to claim infringement of their trademarks. Therefore, a person will be deemed to have infringed on a proprietor’s exclusive rights to its trademark where a person (who is not the proprietor of the mark or a registered user), uses a mark identical to the proprietor’s trademark or uses a mark so nearly resembling it as to be likely to deceive or cause confusion in the course of trade.

Proprietors of unregistered trademarks on the other hand cannot not claim infringement of their trademarks as they are not entitled to the exclusive use of their trademarks. As such the law only entitles them to institute a claim for passing off.

Ways of Enforcing Trademarks

1. File a Notice of Opposition– The proprietor of a trademark can file a notice of opposition at the Trademarks Registry, challenging the application for the registration of an infringing trademark. The Trademarks Act grants persons the right to file a notice of opposition to the registration of a mark when the mark is published in the Nigerian Trademark Journal. The purpose of publishing marks submitted for registration before they are finally registered is to give the public notice of the intention of the Trademarks Registry to register the mark. Persons who are of the opinion that the mark infringes on their trademark have the opportunity to file an opposition within 2 months from the date of the publication. The notice must be in writing and must contain the grounds for opposition. Upon filing of the opposition, the Trademarks Registrar (“Registrar”) will send a copy of the notice to the applicant who is entitled to respond to the notice. The Registrar will after hearing the parties and considering the evidence decide whether the registration will be permitted. The Registrar will after hearing the parties and considering the evidence decide whether the registration will be permitted.

2. Cease and Desist Notification– Proprietors can enforce their rights by sending a cease and desist letter to the infringing entity, containing a description of the trademark that is being infringed and a warning to the infringing party to cease and desist from performing further acts of infringements.

3. Formal Application for the Cancellation of a registered trademark– Where the infringing trademark has already been registered, the proprietor of the trademark may make a formal application to the Registrar of Trademarks or to the Federal High Court for the cancellation of the trademark. The application will be required to be supported by evidence of registration of the proprietor’s trademark which should precede the trademark it seeks to cancel.

4. Institution of a civil action for trademark infringement– A proprietor is entitled by the Trademarks Act to institute an action against the infringing entity for infringement of his trademark. Upon institution of an action, the burden of proof rests on the proprietor to prove infringement on his trademark. Remedies available to the proprietor under this action includes: damages; injunctive reliefs; an order of the court compelling the infringing party to give account and pay to the proprietor the profits from the infringement; delivery up or destruction of infringing goods or products, etc.

5. Formal Application to Relevant Government Agencies– Agencies such as the Corporate Affairs Commission and the Nigeria Internet Registration Association prohibit the registration of a name either as a company, partnership or a domain name which violates an existing registered trademark/domain name unless the consent of the owner has been obtained. The proprietor can therefore make a formal application to these agencies seeking the withdrawal or cancellation of the name on the basis of infringement.

Conclusion

The options highlighted above are not mutually exclusive and an aggrieved proprietor may decide to pursue one or more of the options listed above. It is recommended that the proprietor considers all possible avenues to enforce its trademark and prevent continued or further infringement before commencing legal action so as to save time and reduce the costs involved in litigation. Overall, it is important that all steps taken in relation to the enforcement of a trademark be taken immediately infringement occurs to prevent further damage to the business of the proprietor.