INTRODUCTION
On June 26, 2025, Nigeria ushered in a new era of tax reform with the enactment of four key Laws; the Nigeria Tax Act (“NTA”), Nigeria Tax Administration Act (“NTAA”), Nigeria Revenue Service Act (“NRSA”), and Joint Revenue Board Act (“JRBA”), collectively referred to as the Tax Reform Acts.
These Acts thoroughly revised the country’s tax system, focusing on promoting economic growth and improving tax administration across all levels of government. Although interconnected, each Act has a specific purpose. Notably, the Nigeria Tax Act consolidates and repeals many existing tax laws, creating a unified legal framework for taxation.
Before these reforms, enterprises in Nigeria’s Free Trade Zones (FTZs) enjoyed extensive tax exemptions. The new regime aims to broaden the tax base by requiring previously exempted sectors, such as FTZ operators, to pay taxes. The NTA introduces stricter, performance-based conditions for tax incentives, replacing blanket exemptions with targeted reliefs for export-focused FTZ businesses. It also mandates tax obligations on FTZ firms involved in domestic sales.
This article examines the current legal framework for tax incentives in Nigeria’s FTZs, with particular focus on the 2025 Nigeria Tax Act and its implications for the fiscal autonomy of FTZ entities.
THE ROLE OF FREE ZONES (FZ) IN NIGERIA’S ECONOMIC DEVELOPMENT
According to the Minister of Trade and Investment, Dr. Jumoke Oduwole, while speaking at the third Special Economic Zones (SEZ) annual meeting in Lagos organized by the Nigerian Economic Processing Zones Authority (NEPZA) and the Oil and Gas Free Zones Authority (OGFZA) in February 2025, Nigeria’s Free Trade Zones have attracted over $300 billion in investments and generated more than ₦650 billion in government revenue since its establishment.
By providing a business-friendly atmosphere through tax incentives and streamlined processes, these designated areas have grown to be essential hubs for drawing in foreign direct investment (FDI) and propelling industrialization throughout the country. These investments have resulted in the development of key industrial hubs with stable infrastructure and a growing local manufacturing presence.
LAWS GUIDING FTZ OPERATIONS PRE-NIGERIA TAX ACT
The activities of FTZs in Nigeria are guided mainly by two primary Acts. These include:
1. Nigerian Export Processing Zones Act (NEPZA) for general-purpose zones; and
2. The Oil & Gas Export Free Zone Act (OGEFZA) for oil and gas zones.
Secondary regulations guiding FTZs include: Investment Procedures, Regulations, and Operational Guidelines for Free Zones in Nigeria (2004), Lagos Free Trade Zone Regulation 2016, and OGEFZ Regulations (2003), among others.
In addition, broader tax laws like the Companies Income Tax Act, the Petroleum Profits Tax Act, and the Value Added Tax Act also apply to certain transactions and activities within these zones.
TAX INCENTIVES FROM THE PREVIOUS TAX REGIME FOR FTZS
Prior to the repeal of sections 8 and 18(1)(a) of the NEPZA and OGEFTZ Acts by section 197 of the NTA, these provisions granted significant tax exemptions to Approved Enterprises operating within the FTZs. Section 8 of both Acts provided blanket exemptions from federal, state and local government taxes, levies, and rates, while section 18(1)(a) of both Acts excluded FTZ enterprises from payment of taxes, levies, duties and foreign exchange regulations, including obligations like Value Added Tax or Withholding Tax within the Nigerian customs territory.
It is important to emphasize that only section 18(1)(a) of both Acts, which related specifically to taxes, levies, duties and foreign exchange regulatory exemptions, was repealed by the NTA. Other incentives listed under section 18(1)(b) – (h) of both Acts remain valid and unaffected. They include but are not limited to:
1. 100% foreign ownership of business in the zone;
2. remittance of profits and dividends earned by foreign investors in the zone;
3. non-payment of import and export licenses;
4. repatriation of foreign capital investment in the zones with capital appreciation of the investment; and
5. rent free land at construction stage.
TAX INCENTIVES UNDER THE NIGERIA TAX ACT 2025
The Nigeria Tax Act, 2025 (NTA) seeks to harmonise and consolidate all the legal frameworks regulating taxation in Nigeria and introduces a consolidated framework of tax incentives aimed at promoting national development. These tax incentives include:
1. Income Tax Exemption: Charitable, educational and agricultural organisations are exempt from income tax, provided their income is not derived from trade or business.
2. Deductible donations: Donations made to approved public-interest organisations are deductible up to sum certain percentage of the donating company’s profit.
3. Deductions for Research & Development: Certain percentage of a company’s turnover are deductible for qualifying research and development (R&D) purposes.
4. Economic Development Tax Incentives (EDTI): Companies in priority sectors such as manufacturing, mining, renewable energy, and agro-processing can obtain an Economic Development Incentive Certificate, granting them tax credit on qualifying capital expenditure for a number of years.
Below is a table which compares the old position on tax incentives and the new position for FTZs under the NTA.
S/N | Incentive | Pre-NTA | NTA and its incentive coverage |
1. | CIT | 100% exemption
| No more automatic exemption. FTZs must apply for tax credit for eligible sectors. |
2. | WHT | Exempted | No specific exemption for FTZ in the Act, save for compliance with the relevant provisions of the Nigeria Tax Administration, including those requiring deduction of tax. |
3. | Capital Gains Tax | Exempted | Generally, the rate of CGT for companies has increased but there is no specific provision for FTZs in the NTA. |
4. | VAT | Exempted | For free trade zones and export processing zones, supplies consumed by an approved entity in these zones are exempt from VAT, provided that the consumption is done as stipulated by law. |
5. | Custom Duty | Exempted | This still applies subject to meeting some stipulated conditions. |
6. | Profit Repatriation | 100% allowed | No restriction on repatriation under the NTA, but also no blanket guarantee. Except the Act provides otherwise, this is subject to adherence to regulatory guidelines provided by NEPZA and the CBN. |
TO WHAT EXTENT DO FTZS CONTINUE TO ENJOY COMPREHENSIVE TAX INCENTIVES UNDER THE NTA? – TAX IMPLICATIONS
Under the NTA, FTZs may access tax incentives, but profits can be taxed under certain conditions. With the new alteration of the fiscal landscape for businesses operating in the FTZs by passage of the NTA, the Act highlights the conditions under which FTZs entities may qualify for tax exemptions, some of which are as follows:
1. Taxable Profits: FTZ companies enjoy full tax exemption on profits if all sales are for export except certain percentage are supplied to the custom territory.
2. Future Changes: From 1 January 2028, all profits from sales into the customs territory will be taxable, but exempted period maybe extendable by the President for some years.
3. Tax Compliance: FTZs entities are now required to comply with tax administration provisions, that is, registration, filing of tax returns, and deduction of taxes at source where applicable.
4. Taxation of Services: Services rendered to or consumed by FTZ entities within the customs territory are subject to applicable taxes.
CONCLUSION
The new Nigeria Tax Act introduces significant changes to tax administration, impacting Free Trade Zone (FTZ) businesses. To navigate this new landscape, companies should:
1. Review operational structures and revenue streams.
2. Ensure compliance with the new regulations.
3. Assess potential tax liabilities.
This change may require FTZ businesses to adapt their strategies to optimize tax efficiency and avoid potential risks.
About AO2LAW:
At AO2LAW, we’re dedicated to delivering cutting-edge Tax Advisory and Litigation service, within our Commercial and Criminal Law Practice Group (CCLP). Our Practice brings to bear our expertise in Tax, Financial Services, Regulatory Compliance, Mergers and Acquisition.
Through Taxaide Technologies Limited, our affiliate, we empower businesses with expert tax management and auditing solutions.
For further information on the foregoing (none of which is legal advice) or related matters, please generally contact us at cclp@ao2law.com, or specifically the key contact
Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries about this should please be directed at the key contacts
