- 15 Marks
Question
The Federal Government in a bid to further boost the growth in foreign exchange earnings, create new jobs, facilitate economic diversification, industrialization, and provide access to foreign technology, came up with its export processing zones (EPZs) policy.
EPZ is regarded as a customs area where an enterprise is allowed to import plant, machinery, equipment, and raw materials, process them, and then export them to the world market, under security and without paying duty.
To facilitate a better understanding of the above assertions, the Managing Director of a would-be client approached you for explanations of the relevant provisions of the Nigerian Export Processing Zones Act Cap. N107 LFN 2004 (as amended) and Companies Income Tax Act Cap. C21 LFN 2004 (as amended).
Required:
a. Discuss SIX special tax incentives for enterprises operating in an export processing zone. (12 Marks)
b. Explain the penalties for non-compliance with section 55(1) of CITA (as amended). (3 Marks)
Answer
a) Special Tax Incentives for Enterprises in an Export Processing Zone
- Exemption from Taxes and Levies: Legislative provisions on taxes, levies, duties, and foreign exchange regulations do not apply within EPZs.
- Repatriation of Capital: Foreign investors are permitted to repatriate their capital and any appreciation without restrictions.
- Profit Remittance: Foreign investors can remit profits and dividends without being subjected to exchange regulations.
- No Import/Export Licenses: Enterprises within the EPZs are exempt from obtaining import or export licenses.
- Duty-Free Sale Allowance: Up to 25% of production can be sold in the customs territory with valid permits and appropriate duty payments.
- 100% Foreign Ownership: Full foreign ownership is allowed, facilitating foreign investment in Nigeria.
b) Penalties for Non-Compliance with Section 55(1) of CITA (as amended)
Non-compliance with Section 55(1) of the Companies Income Tax Act (CITA) may subject a company to various penalties as prescribed by CITA and the Federal Inland Revenue Service (Establishment) Act, 2007. These include fines and additional interest charges determined by the Federal Inland Revenue Service (FIRS) for failing to file or filing inaccurate returns.
- Tags: CITA Penalties, Export Processing Zones, Foreign Investment, Tax Compliance
- Level: Level 2
- Topic: Tax Incentives and Reliefs
- Series: MAY 2023
- Uploader: Theophilus