The Federal Inland Revenue Services (FIRS) issued a public notice on 1 April informing all approved enterprises operating within Nigeria’s Free Trade Zones of their duty to file income tax returns as from 2021 and compute and pay any income tax due (if any).
This compulsory filing is pursuant to the Finance Act 2020. The Finance Act 2020 amended section 18 (1) of the Nigeria Export Processing Zones Authority Act (NEPZA Act) and section 18 (1) of the Oil and Gas Export Free Zone Act (OGEFZA Act).
Consequently, all Free Zone Enterprises (FZE) are required to comply with the provisions of Section 55(1) of the Company Income Tax Act.
Section 55 (1) provides that:
- Every company, including a company granted exemption from incorporation shall, whether or not a company is liable to pay tax for a year of assessment, file a self‐assessment return in a prescribed form at least once a year.
- The self-assessment returns should be made the manner and time specified by the company Income Tax Act.
- Failure to comply with this compulsory filing or late filling shall result into penalties namely:
(a) N25,000 in the first month in which the failure occurs; and
(b) N5,00 for each subsequent month in which the failure continues.
FIRS Special Filing Arrangements For FZE
The Public Notice provides that for ease of compliance, all approved enterprises are required to file their income tax returns at the following FIRS’ tax offices:
- Enterprises operating in the Zones located in South-South Geo-political region of Nigeria- MTO Port Harcourt;
- Enterprises operating in the Zones located in South-East Geo-political region of Nigeria- MTO Enugu;
- Enterprises operating in the Zones located in South-West Geo-political region of Nigeria- MTO Ibadan;
- Enterprises operating in the Zones located in North-East and North-West Geo-political region of Nigeria- MTO Kano;
- Enterprises operating in the Zones located in Lagos State- MTO Lagos Island; and
- Enterprises operating in the Zones located in North-Central Geo-political region of Nigeria and FCT- MTO Abuja.
FZE remain undoubtedly exempt from all federal, state, and local government taxes, levies, rates and duties in connection to all operations carried out within the Free Trade Zone.
The computation and payment of income taxes due refers to transactions carried out outside of the Free Trade Zone.
In our view, this amendment only imposes additional documentation and filing requirements on approved FZE and does not affect the tax mechanism around FZE.
For any assistance with respect to the impact of this new filing requirement on your organisation, Carpus Tax shall be pleased to assist.