Free Trade Zone Firms Can Sell 25% Output Locally Without Incentive Loss, Says Federal Inland Revenue Service

The new Nigeria Tax Act allows companies operating within Free Trade Zones (FTZs) to sell up to 25 per cent of their output into the domestic market without losing their tax exemptions.

The Federal Inland Revenue Service (FIRS), which made this known, stated that, Nigeria’s newly enacted tax laws are designed to strengthen economic competitiveness, attract investments and improve long-term fiscal stability.

The agency also clarified that the much-debated four per cent Development Levy on imported goods is not a new or additional tax burden, but a streamlined consolidation of several existing levies.

The FIRS clarified that that the government was not rolling back the incentives for FTZs that have attracted export-oriented investors for decades.

It said that however, the reforms maintain the tax-exempt status of FTZ enterprises and introduce clearer guidelines to preserve the purpose of the zones.

“Under the new rules, FTZ companies can sell up to 25 per cent of their output into the domestic market without losing tax exemptions. A three-year transition period has also been provided to allow firms to adjust smoothly.” Government officials say the reforms aim to curb abuses where companies used FTZ licences to evade domestic taxes while competing within the Nigerian market.

With the new measures, Nigeria aligns with global FTZ models in places like the UAE and Malaysia, where the zones function primarily as export hubs for logistics, manufacturing and technology.

The introduction of a 15 per cent minimum Effective Tax Rate (ETR) for large multinational and domestic companies has also been met with public concern. But the FIRS noted that, this policy aligns with a global tax agreement endorsed by over 140 countries under the OECD/G20 framework.

Without this adoption, Nigeria risked losing revenue to other countries through the “Top-Up Tax” mechanism, where the home country of a multinational collects the difference when a host country charges below 15 per cent. By localising the rule, Nigeria ensures that tax revenue from multinational operations remains within its borders.

The ETR is also extended to large domestic companies to ensure a level playing field and discourage profit-shifting practices that undermine the fiscal system.

The reforms also introduce sweeping changes to capital gains taxation—now termed “chargeable gains.”

The new framework contains several incentives to promote investment and capital mobility.