Nigeria's Free Trade Zone regime was designed to attract investment, drive export-oriented manufacturing, and strengthen industrial growth by offering approved enterprises a more favourable operating environment. The Nigeria Tax Act, 2025 does not dismantle that policy rationale. However, Section 60, read together with the Second Schedule, carves out a distinct boundary between export activity and sales into the domestic market, setting a firm deadline for full taxation of the latter.
Under the new framework, an export processing zone entity remains entirely exempt from tax only where its total sales are derived from exports — or from inputs into goods or services exclusively meant for export — and no more than 25 per cent of its sales flow into Nigeria's customs territory. If domestic sales exceed that threshold in any year of assessment, the profits attributable to those local transactions become taxable.
The more significant shift lies ahead. From 1 January 2028, the profits of an export processing zone entity will be fully subject to tax in respect of all sales to the customs territory, regardless of how small a share those domestic sales represent. The President may extend this date by order published in the Official Gazette, but the extension cannot run beyond 10 years from the commencement of the Act.
The law draws a simple distinction. Export-focused activity — goods or services that leave Nigeria, or inputs used exclusively in exported outputs — continues to qualify for the zone incentive. Domestic sales, meaning goods or services sold into the Nigerian customs territory, progressively lose that shelter. The policy logic is clear: the domestic market should not enjoy the same level of tax protection as genuine export operations.
Compliance obligations extend beyond income tax. Zone entities must still meet registration, filing, and tax deduction-at-source requirements. Services rendered by persons in the customs territory to a zone entity, or services consumed in the customs territory by a zone entity, also attract applicable taxes.
Before the 2028 deadline, zone operators continue working within the current threshold structure. Once the deadline passes, even a business that exports 80 per cent of output will find the remaining 20 per cent sold locally fully exposed to tax. The export side stays incentivised; the local sales side does not.
For free zone operators, the immediate task is to measure domestic market revenue. A business selling exclusively to export customers faces limited exposure. A business using the zone as a manufacturing base while building a Nigerian sales channel requires deeper planning. Pricing models will need revision, since margins that looked competitive under a tax-free structure may erode once the local sales arm carries full tax cost.
Record-keeping becomes more important as well. Companies must document and separate export transactions from domestic sales cleanly, tracking income streams with enough precision to satisfy the new compliance expectations. The administrative burden will rise where a business operates mixed sales.
Investors should similarly reassess their assumptions. Zone location retains strong value for export-oriented production, but investment models that depend heavily on Nigerian domestic sales need fresh cost forecasts tested against the post-2028 tax reality.
Businesses should now be asking: how much of our revenue comes from domestic sales, are our records robust enough to separate export and local transactions, will our current model remain efficient after 1 January 2028, and do we need to restructure operations, pricing, or distribution before the deadline arrives.
Section 60 does not end the Free Trade Zone model. It preserves the incentive for genuine export activity. What it does is tighten the tax treatment of domestic market sales and create a clear countdown. For zone enterprises, the sensible response is to map exposure early, separate export and local streams cleanly, and build a tax plan that fits the new framework before the deadline.