The main tax issues which arise on projects include whether there will be value added tax, the applicable rate of stamp duty on the transaction document(s), and transfer taxes in relation to land or other property. Controversy is sprouting again among building sector professionals on the scale of fees being charged in the industry. The FGN is taking steps towards reducing the infrastructure deficit through increased spending as part of a 30-year infrastructure plan (National Integrated Infrastructure Master Plan) (Infrastructure Plan) with a target date of 2043, which aims to bring Nigeria's infrastructure stock to the GDP level recommended by the World Bank. Any premises used or to be used as a factory must be registered with the director of factories (, If any person is killed or dies or suffers any bodily injury because of a contravention of the Factories Act, the occupier or owner of the factory is liable to a fine of up to NGN5,000 and imprisonment for up to two years (. 0% if its turnover is less than NGN25,000,000. There are various mechanisms available to Nigerian companies for mitigating taxes, depending on the nature of the transaction and the project. Fee proposed is 10% of Gross Rent Payable, or Gross Proceeds of Sale/Purchase. Debt providers include Development Finance Institutions, multilateral agencies, commercial banks, Export Credit Agencies. In 2020, the FGN issued a NGN162.5 billion (about USD393.4 million). Advising a leading energy company in connection with the restructuring of loan facilities worth an aggregated USD723 million, aimed at mitigating the impact of the devaluation of the Naira on its business. There is also no compulsory levy to fund local infrastructure. Deep-sea port with a railway project connecting Calabar with Port Harcourt and Onne Deep Sea Port. In 2019, the Ministry of Works and Housing set aside a total sum of 19.8 billion naira ($55 million) for the construction of 2,383 units of housing across the 36 states of Nigeria under the National Housing Program. Risks associated with fitness are mitigated through performance guarantees from the contractors. Generally, a contractor has no obligation to personally perform all the works involved in the project unless expressly obliged under the agreement. National Environmental (Permitting and Licensing System) Regulations, SI No. Cost is a vital element in every development. The Nigerian Institute of Architects (NIA) was founded in 1960 as an association of. Preliminary EIA to be carried out at the end of the concept selection studies. In addition, the NMWA does not apply to establishments that employ less than 25 persons, or in which people are employed on a part-time or piece-rate basis. Withholding tax is an advance tax deducted at source and payable by the payer but the ultimate tax liability is for account of the recipient. Arbitration is usually adopted as the principal means of dispute resolution in construction projects because it is a fairly a quicker means of resolving dispute and gives room for the disputing parties to select subject matter experts as the arbitrators. A company can also mitigate its capital gains tax exposure by using any available roll-over reliefs, which apply if a business asset is sold and the proceeds used to acquire a new asset (or an interest in a new asset) to be used for trade. The PPP model has been implemented in various sectors of the Nigerian economy such as ports, transportation (road, rail, water and airports), health, housing, education, free trade zones, and most recently, in the electric power sector. Some of the penalties under Nigerian anti-corruption laws include the following: The Corrupt Practices Act prescribes a penalty of seven years imprisonment for any person who, being a public official: corruptly asks for, receives or attempts to receive or obtains any property or benefit of any kind before or after doing or omitting to do something in an official capacity; gives, confers or procures, or promises or offers to give, confer, procure or attempt to procure, any property or benefit of any kind to or for a public officer, or any other person on account of any act performed in an official capacity. Under Nigerian law, exclusion of liability is typically achieved through limitation of liability clauses. Alu - February 25, 2022. The Borno state government has commenced an Owner Occupier scheme for 2,787 housing units in the state. The continuing expansion of Nigeria's middle class has made investments in condominiums and shopping malls a popular choice for private capital. Parties generally have a choice over the applicable arbitration rules. The current monthly minimum wage prescribed by the National Minimum Wage Act 2019 (NMWA) is NGN30,000. It is usual for parties to agree a period beyond which the contract will be terminated on account of the subsistence of a force majeure event. Builders must be licensed by the Nigerian Institute of Building. In most contracts for the construction of process plants, liability is usually capped at 25% of the contract price. Webprofessionals in the Built Industry to develop an harmonised scale of fees. In some cases, a project company may procure a single project insurance package and by virtue of the project agreements, share the benefit of the insurance cover with different project service providers. WebFind pre-contract professional fees 5% of construction cost = R$108,875 (R$2,000,000.00 to R$4,000,000.00 Range) Contract Value/Building Gross Floor Area = 2,177,500.00/347m2 = R$6275.22 per m2 Pre-contract professional fees 5% of R$6275.22 = R$313.76 per m2 of gross floor area Stage A 7.5% of R$313.76 = R$23.53 per m2 This paper concerns an investigation into the causes of high costs of construction in Nigeria. It allows government agencies to: Request quotations or expressions of interest. The client has the right to suspend payments to the contractor by issuing a pay less notice ,if this can be done, within the prescribed timeframe under the contract. WebLowe (2003) further stated that the value added of construction is in the range of 7% to 10% for highly developed economies and around 3% to 6% for underdeveloped economies. Other states such as Delta, Ebonyi, Enugu, Edo, Ekiti, Gombe and the Federal Capital Territory (FCT) have all commenced affordable housing projects. Professional Bodies in Nigerian Construction Industry. Some of the arbitration rules that can be adopted by the parties to govern their arbitration proceedings include the: Arbitration and Conciliation Act, Cap A18, Law of the Federation of Nigeria 2004 (ACA). WebLowe (2003) further stated that the value added of construction is in the range of 7% to 10% for highly developed economies and around 3% to 6% for underdeveloped economies. The Constitution also creates the Federal High Court with jurisdiction over specific subject matter. A special purpose vehicle used to execute the project will be liable to pay: 30% of its total profit (less any allowable deductions and capital allowances) if it has more than NGN100,000,000 turnover; 20% if it has a turnover between NGN25,000,000 and NGN100,000,000; or. In February 2021, at commissioning of a 1.12 MW Captive Solar Hybrid Power Plant at the Abubakar Tafawa Balewa University, Bauchi which was executed under the Energizing Education Programme (EEP), the FGN stated that Nigeria intends to have 30% of its electricity supply from renewables by the year 2030. 1 Percent of General Construction Total General Construction Estimate = $50,000,000 25% of Total General Construction = MEP Portion of the Construction = $12,500,000 MEP Design Fee: as Percentage of the MEP Construction (4%): Design Fee = $12,500,000 x 4% = $500,000 as Percentage of General Construction (25% x 4% = 1%): Standard forms of contracts prepared by the Joint Contract Tribunal (JCT). Advised New Electricity Development Company Ltd on the acquisition of Ikeja Electricity Distribution PLC. Any person who commits an offence by act or omission, aids another to commit an offence, or counsels or procures another to commit an offence is themselves guilty of the offence and liable on conviction to imprisonment for life. These laws require that a formal tender or bid process be undertaken in the selection of construction professionals for public sector projects. The contractual provisions that govern or limit liability include provisions dealing with any of the following: Indemnities on account of losses caused by delay. Professional fees in building projects Structural engineering fees Rp200,000 to Rp 300,000 per square metre MEP (mechanical, electrical and plumbing) design fees Rp120,000 per square metre Quantity Surveyors fees Rp60,000 per square metre It is common for a tender process to be carried out or for qualified professionals to be invited to submit bids or proposals in relation to private projects. There is currently a bill at the Nigerian National Assembly in connection with the development of local expertise and capacity in the Nigerian construction industry. Advised Kepco Energy Resources Limited, the joint venture company established by the Sahara Energy Group and Korea Electric Power Corporation, in connection with its acquisition of a 70% equity interest in Egbin Power Plc. Various states in Nigeria have also passed laws regulating PPP projects in their states. WebFee is to be negotiated subject to a minimum of N50,000=. However, there are other transfer fees and taxes payable on the transfer of real property. Guidelines for the Development of Local Content in the Nigerian Electricity Supply Industry. If this applies, any gains realised from the disposal of the asset will not be subject to capital gains tax but the company will be entitled to claim a roll-over relief if the new asset is acquired, or an unconditional contract for the acquisition is entered into, within 12 months before or after, the disposal of the old asset. However, Nigeria currently builds just 2,000 houses per year. The following forms of security are typically taken in infrastructure projects: Share charge on all the shares and other equity rights (present and future) of the sponsors in the project company (and holding company). There is no specific law on how construction disputes should be resolved in Nigeria. The modes of appointment of construction professionals in Nigeria vary between the public sector and the private sector. However, it is common for a contractor's obligations to be qualified to the extent that once the contractor has used its best endeavours or has applied the degree of skill and care that could reasonably be expected from a professional of its status, the project company is obliged to accept the completed project. d) PSGS 4: Property Management. There are 3 stages of payment. Any significant expansion in the construction industry will partly depend on the pace of implementation of the Nigeria Economic Sustainability Plan (NESP), the country's post-COVID economic recovery plan, and the Economic Recovery and Growth Plan for 2017-2020 (ERGP). A Q&A guide to construction and projects law in Nigeria. Legal or equitable mortgage on all of the project company's interest in the project site, land and buildings and fixed plant and machinery. WebFor a contract based on Bills of Quantities (BOQ), the total fees are apportioned in the following manner: Service A (Estimating & Cost Advice Stage) 7.5% Service B (Documentation Stage) 42.5% Service C (Contract Administration Stage) 30% Service D (Final Account Stage) 20% Provisional BOQ Contract: Where the assets to be used in a construction project are liable to VAT, the purchaser must pay VAT on the consideration payable for such assets at the rate of 7.5%. The CC Act also prescribes the same penalty in relation to similar offences as those immediately above. The provisions that commonly govern contract variations are those that regulate issuing change orders or additional work. The concept of PPPs as an alternative to the funding of public utilities is gradually gaining popularity in Nigeria. The contractors also obtain limited time warranties, typically between 12 and 24 months, from the original equipment manufacturers, which they pass on to the project owner. The contractor is, therefore, required to comply with health and safety regulations relating to employees that work in certain areas of the project or that operate certain machinery wearing protective clothing. The repayment of the loan is structured in accordance with a repayment schedule by way of amortisation, or very rarely, a bullet repayment. According to the Minister of Transport, the Kano-Maradi rail is aimed at facilitating bilateral trade between Nigerian and Niger. Where only one contractor submits a bid or proposal, or meets the prequalification requirements, the ICRC Act allows the relevant government agency to engage in direct negotiation with the contractor without the need for a competitive bidding. Where the FEC is satisfied that the project should be carried out using a PPP, it grants its approval to the project. 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