Taxing the Untaxed: Nigeria’s Free Trade Zone Taxation Regime Reimagined

Background

The Nigeria Tax Act, 2025 (“NTA 2025”) as well as other Tax Reform legislations – the Nigeria Tax Administration Act 2025, the Nigeria Revenue Service Administration Act 2025, & the Joint Revenue Board of Nigeria 2025 (all collectively called “the Reform Acts) signed into law in June 2025 mark a significant legislative overhaul of Nigeria’s tax regime. These Reform Acts consolidates various existing tax frameworks and introduces new provisions to regulate taxation across Nigeria. Among its detailed provisions, the NTA 2025 presents a comprehensive approach to taxing entities operating within Export Processing Zones (EPZs) and Export Free Trade Zones (FTZs) (“Approved Entities”), established to strategically boost economic growth, attract foreign direct investment, and promote export-focused industries by offering various tax incentives.

Export Processing and Free Trade Zone Entities: Comparing Structures

Prior to the promulgation of the NTA 2025, Approved Entities operating within Nigeria’s EPZs/FTZs enjoyed broad tax exemptions designed to incentivize investment within these Zones. Notably, the Nigeria Export Processing Zone Act of 1992 (NEPZA Act) and the Oil and Gas Export Free Zone Act (OGFZA) explicitly provides that “approved enterprises operating within a Zone shall be exempted from all Federal, State, and Local taxes, levies, and rates.” This comprehensive relief included exemption from corporate income tax (CIT), value-added tax (VAT), import and export duties obligations. In addition, FTZ enterprises enjoyed unrestricted repatriation of capital and dividends, waivers of expatriate quotas, rent-free land during construction, and complete exemption from foreign exchange controls.

To qualify for these incentives under the existing regime, an enterprise must first propose to undertake an “approved activity” such as manufacturing goods for export, warehousing, handling duty-free goods, banking, or importing goods for special services, among others. This initial step is followed by a formal application to the NEPZA Authority. If the application is approved, the enterprise will be granted a license to carry out the approved activity within the Zone and will then become entitled to the substantial incentives provided under the Act.

Under the NTA 2025

The NTA 2025, however, introduces a recalibrated model which replaces these blanket exemptions with a more conditional and targeted incentive regime. While the NTA 2025 maintains a general exemption of profits from tax, strict compliance with two conjunctive criteria are now a condition precedent for eligibility for this exemption. Firstly, to enjoy tax exemption, an Approved Entity’s sales must be wholly derived from export activities, either through the direct export of goods and services or by supplying inputs that are themselves exclusively used for exports. This requirement firmly anchors the incentive to its underlying policy goal of promoting export-led growth.

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