FIRS and NEPZA signed a Memorandum of Understanding – Highlight

The Federal Inland Revenue Service (FIRS) and the Nigeria Export Processing Zones Authority (NEPZA) on the 7th of June 2022 signed a memorandum of understanding aimed at closing the tax administration gaps in the nation’s free trade zones.

 Below are summaries of tax implications in the appendix of the signed MOU.

1.     VAT and WHT are applicable on purchases made by NEPZA-registered business entities operating within the Free Trade Zones (“approved enterprises”) from companies operating in the Customs Territory. Approved enterprises are expected to pay VAT upon purchase from companies operating in the Customs Territory. However, in accordance with sections 8 and 18 of the NEPZA Act which exempts approved enterprises from all taxes, VAT remitted by approved enterprises will be refunded not later than ninety (90) days to the extent that evidence of export to the zone is provided.

Also, approved enterprises are to withhold their payments to companies operating in the Customs Territory and remit to the relevant tax authorities on behalf of the companies.

2.     Companies operating in the Customs Territory are expected to pay CIT and VAT on purchases from approved enterprises but not to withhold. Notably, sales made by approved enterprises to companies in the Customs Territory are liable to CIT and VAT. This implies that FIRS has appointed approved entities as VAT collection agents. Hence, approved entities are to include VAT on their invoices issued to companies operating in the Customs Territory.

3.     Tax incentives offered by the NEPZA Act do not cover businesses that operate within the Free Trade Zone without a NEPZA license (unapproved entities). CIT and VAT are payable by unapproved entities on income derived from sales and WHT are applicable on purchases.

 Simply, unapproved entities are treated as companies operating in the Customs Territory concerning tax administration matters.

4.     Imported goods transported through other ports outside the Zones to approved enterprises are exempted from VAT and WHT provided to the goods are escorted from the point of entry and receipted by the Nigeria Customs Service.

5.     Approved enterprises are exempted from taxes, levies, and rates but not from filing tax returns.  Hence, approved enterprises are required to submit their tax returns with FIRS as well as NEPZA. There are no obligations to remit taxes on these returns.

6.     The business activities of head offices or branch offices of approved enterprises located in Customs Territory dealing with approved enterprises are subject to applicable tax laws with exception of purchases and sales covered above.

7.     VAT and WHT are applicable on approved entities’ contracts with companies in the Customs Territory.


 The FIRS claimed that the MOU is aimed to enable both organizations to work together to improve and increase tax collections at the free trade zones without conflict of interest.

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