Have you ever wondered how liberating it would be to carry on business in an environment where you wouldn’t need to worry about the tax man knocking at your door and asking you to pay your tax? Or do you even know that it is possible for you to enjoy a tax free regime in doing business?
Well you don’t have to wonder for too long as there are several free trade zones spread across the country.
According to the Britannica Encyclopedia, “a free trade zone is an area within which goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities”. Hence it is only when the goods are moved to consumers within the country in which the zone is located that they become subject to the prevailing customs duties.
Free trade zones have been established in Nigeria by the President. As at today, there are over 20 of such free trade zones including: the Lagos free trade zone, Lekki free zone, Calabar free trade zone, Onne Oil & Gas Export free zone, Tinapa free zone & Tourism resort, Olokola free trade zone amongst others.
There is a tax exemption regime enjoyed by companies and firms that operate in a free trade zone. The objective on the part of the Government for creating such zones however is to develop the areas where the zones are located and encourage foreign direct investments through the incentives it provides to the companies and firms in the zones.
Some of the incentives provided by the government to encourage businesses in the free trade zones include:
- complete holiday for the companies or firms in the free zones from all federal, state and local government taxes;
- duty free importation of capital, goods, machinery/components, spare parts, raw materials and consumable items in the zones;
- 100% foreign ownership of investments;
- 100% repatriation of capital, profits and dividends;
- waiver of all import and export licenses;
- waiver on all expatriates quotas;
- one-stop approvals from permits, operating license and incorporation papers;
- permission to sell 100% of goods in the areas outside the zone (when selling into these areas, applicable customs duty on imported raw material would apply);
- in the case of prohibited items in the custom territory( which refers to areas outside the free trade zone), free trade zone goods are allowed for sale provided such goods meet the requirement of up to 35% domestic value addition;
- minimal delays in the movement of goods and services; and
- rent free land during the first 6 months of construction (for government owned zones).
(to be continued)