Nigeria's New Tax Reforms Promise Relief, Not Burden, for Airlines

The Nigerian government has strongly dismissed fears that its new tax laws will create a heavy tax burden on airlines. Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, insisted the reforms are designed to ease, not worsen, the Nigeria airline financial challenges. The Committee acknowledged the difficulties facing the aviation sector. These include the long-standing burden of multiple taxes and levies and regulatory charges. They stressed that extensive consultations with airline operators are ongoing.

Structural Relief for Airline Operators

Contrary to circulating concerns, the Committee stated the new tax laws are a critical part of the solution. Several long-standing cost drivers have been structurally addressed. The most significant relief targets the withholding tax on aircraft leases.

Eliminating the Biggest Tax Burden

The existing 10 per cent rate on aircraft leases was described as the single biggest tax burden. Under the new Nigerian aviation tax reforms, this withholding tax has been removed. It is replaced with a rate to be set by regulation. This creates a pathway for a full exemption or a significantly lower rate.

Previously, a $50 million aircraft lease meant a $5 million non-recoverable withholding tax payment. This cost directly strained cash flow and operations. Eliminating this burden offers major structural relief for the sector. Many global aviation bodies, like IATA, advocate for such measures to support capital-intensive operations.

Value Added Tax and Corporate Income Tax Changes

The Committee also clarified changes regarding the Value Added Tax (VAT). A temporary VAT suspension introduced after COVID-19 created hidden costs. Airlines could not recover input VAT on certain assets, consumables, and overheads. This meant VAT became embedded in operating costs.

Under the new laws, airlines will become fully VAT-neutral. All input VAT on imported goods and locally sourced services will be fully claimable. The law mandates VAT refunds within 30 days. This refund is supported by a fully funded tax refund account. Credits can also be offset against other tax liabilities.

Corporate Tax and Import Duties

Regarding reducing corporate income tax, the new framework provides a pathway to lower the rate. The rate is expected to drop from 30 per cent to 25 per cent. This move is expected to benefit airlines. Furthermore, existing exemptions on import duties for commercial aircraft, engines, and commercial aircraft spare parts remain intact. No new duty burden has been introduced by the reforms. Major manufacturers like Airbus and Boeing rely on such exemptions for global sales.

Addressing Airfare Concerns

The clarification follows warnings from industry leaders, including the Chairman of Air Peace, Allen Onyema. He had warned that the new tax regime could push domestic economy class fares as high as N1.7 million. The Presidential Fiscal Policy Committee countered these fears of higher ticket prices.

Airline operations are typically low-margin. A 7.5 per cent VAT on tickets, with full input VAT recovery, results in a significantly lower net impact. The Committee calculated that even in a worst-case scenario, the maximum increase would be limited to 7.5 per cent. For example, a N350,000 ticket would increase to approximately N376,250. This is far below the figures being circulated.

Finally, several profit-based levies have been harmonised. Levies like the Tertiary Education Tax, NASENI, NITDA, and Police levies are now a single Development Levy. This reduces complexity and improves certainty for operators. The tax harmonisation provisions in the new framework mean the situation can only improve from 2026. For more breaking commercial aviation news, visit flying.flights.