In the dynamic landscape of global trade, Export Processing Zones (EPZ) and Free Trade Zones (FTZ) have emerged as catalysts for international investment and economic growth. Countries worldwide, including Nigeria, recognize the pivotal role these zones play in fostering economic development. One common denominator among these zones is the implementation of tax incentives to attract and retain businesses and investors.
Driving Economic Growth Through Tax Incentives:
EPZs and FTZs in Nigeria are designed to provide a conducive environment for both local and foreign companies to conduct industrial activities, boosting the country’s export revenue and employment opportunities. These zones typically offer favorable tax arrangements, attracting enterprises of diverse nationalities seeking to leverage these benefits.
Key Tax Incentives in EPZs and FTZs:
- Tax Exemption for Export Profits: Nigerian companies earning profits from the export of goods are exempt from tax, provided the profits are repatriated and exclusively used to purchase raw materials, equipment, and spare parts.
- Expatriate Quota Waiver: All EPZ and FTZ enterprises enjoy a waiver of expatriate quotas, facilitating the free repatriation of foreign capital invested at any time, with capital appreciation on the investment.
- Tax Holiday for Export-Oriented Companies: Companies outside an EPZ but engaged in 100% export-oriented activities can benefit from a three-year tax holiday, under certain conditions.
- Capital Allowance for Manufacturing Activities: Companies engaging in approved manufacturing activities within an EPZ qualify for a 100% capital allowance for qualifying buildings and equipment.
- Tax Exemption for Input Sales: Companies exclusively supplying inputs for goods manufactured for export are exempt from tax, subject to obtaining a certificate of purchase from the exporter.
- Foreign Ownership and Import Benefits: FTZs allow 100% foreign ownership of businesses. Duty-free, tax-free import of raw materials and components for goods destined for re-export is permitted.
- Flexible Labor Policies: EPZs and FTZs enable the engagement of expatriate managers and personnel without restrictions.
- Dispute Resolution and Administrative Ease: Disputes within the zones are resolved expediently and equitably by the relevant authorities. One-stop approvals streamline the process for permits, operating licenses, and incorporation papers.
- Incentives for Research and Development: Companies involved in Research and Development activities for commercialization receive a 20% investment tax credit on qualifying expenditure.
- Investment Tax Credits for Local Manufacturing: Companies engaged in fabricating tools, spare parts, and machinery for local consumption and export enjoy a 25% investment tax credit. Buyers of locally manufactured plants and machinery are entitled to a 15% investment tax credit.
- Preferential Tariffs and Complete Tax Exemption: Some economic blocks, such as the European Union, offer preferential tariffs for made-in-Nigeria goods. Complete exemption from federal, state, and local government taxes, levies, duties, and foreign exchange regulations.
Sunmola David and CO. Role in Facilitating FTZ Management:
Sunmola David and Co. plays a pivotal role in supporting taxpayers and administrators in navigating the complexities of FTZs. With a focus on discreet, transparent, and efficient tax functions, Sunmola David and Co. provides a range of advisory services, including:
- General and specific advice on fiscal incentives within FTZs.
- Filing of relevant tax and fiscal returns with the Nigerian Export Processing Zones Authority (NEPZA).
- Management of the process for obtaining/enforcing incentives through NEPZA, Zone Managers, or other regulators.
- Obtaining all relevant incentives certifications and approvals.
In essence, Sunmola Davia and Co. empowers businesses to make informed tax decisions that contribute to value creation within the dynamic landscape of EPZs and FTZs in Nigeria.
For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.
