Legal Framework of Free Trade Zones in Nigeria: A Shift Towards Taxation

This paper examines the operations of Free Trade Zones in Nigeria, adopting the doctrinal legal research methodology. It explores amongst others, the regulatory framework provided under the Nigeria Export Processing Zones Authority Act, 1992, the Nigeria Export Processing Zones Authority Order, 2002 and the Investment Procedures, Regulations, and Operational Guidelines for Free Zones in Nigeria, 2004. The paper also critiques the operations of free trade zones in Nigeria against the backdrop of the proposed National Tax Bill, 2024. As this paper will reveal, the proposed regime under the National Tax Bill marks a paradigm shift from the tax-exempt incentive granted under the extant legal framework to a graduated tax system. This proposed tax regime is structured into three (3) tiers – full exemption, partial exemption, and no exemption – determined by the level of export performance of entities operating within the zones. The findings expose several gaps in the proposed tax regime, including the risk of tax avoidance by offshore or related entities, the absence of a defined methodology for determining proportional tax in cases of partial exemption, increased administrative burden and a disproportionate penalty system arising from the trifurcated tax structure, amongst concerns. This paper, in reflecting on these statutory gaps, concludes by emphasizing the need for a cautious approach, thorough impact assessment, and adequate stakeholder consultation.