Nigeria's Tax Overhaul: How Removing the 10% Aircraft Lease Tax Will Boost Airlines.

The Nigerian aviation industry is set to receive significant financial relief. This follows a major change to the nation's tax laws. The Presidential Fiscal Policy and Tax Reforms Committee has reportedly removed a contentious levy. This levy was the 10% withholding tax (WHT) on aircraft leases.

Industry experts and airline operators had long criticized the tax. They called it the single biggest financial burden on local airlines. The committee acknowledged that this tax severely strained airline operating margins.

The Problem with the 10% Withholding Tax

The previous Nigerian aviation tax law required airlines to pay a 10% WHT on aircraft lease payments. This tax was non-recoverable. It directly increased operating costs for carriers.

To illustrate the impact, the committee provided a clear example. An airline leasing a $50 million aircraft would pay $5 million in WHT. This cost directly impacted the airline’s cash flow. Such a heavy, non-recoverable charge often exceeded the entire profit margin of the business.

Removing this fixed rate is a key part of the new structural tax reforms. The change replaces the 10% WHT with a new provision. This provision allows the rate to be set by regulation. This creates the legal framework for a full exemption or a much lower rate.

Broader Tax Reforms and Industry Impact

The tax committee, chaired by Taiwo Oyedele, insists the reforms are designed to ease financial pressure. They aim to resolve long-standing structural issues. The changes extend beyond the aircraft lease withholding tax.

VAT Neutrality for Airlines

The new framework also addresses Value Added Tax (VAT) issues. Airlines will now become fully VAT-neutral. This means they can fully recover input VAT. This includes VAT paid on imported or locally sourced assets and services.

• The old system, with a temporary VAT suspension, created hidden costs.
• Airlines could not recover input VAT on many items.
• The new law mandates VAT refunds within 30 days.

This change is expected to reduce cost pressure. It will also improve liquidity for Nigerian carriers. The government aims to support Nigeria airline profitability.

Corporate Income Tax and Harmonization

Further relief is planned through a reduction in Corporate Income Tax (CIT). The new law provides a framework to reduce the rate. It could drop from 30% to 25%.

Additionally, several profit-based levies are being harmonized. Levies like the Tertiary Education Tax are being combined. They will become a single Development Levy. This move reduces complexity and increases certainty for taxpayers.

Future Outlook for Commercial Aviation

Stakeholders view the removal of the 10% WHT as a critical step. It addresses a major barrier to investment in the sector. Lower operating costs could encourage fleet expansion. This may also attract more foreign lessors to the Nigerian market.

While some industry figures still express concerns about multiple charges, the committee maintains the reforms are positive. They stress that the new laws provide a legal basis for long-term solutions. These changes are intended to foster growth in the domestic and international air transport sectors. For the latest commercial aviation news and analysis on global regulatory changes, visit flying.flights.

The ultimate goal is to create a more financially stable environment. This stability is crucial for the survival and expansion of local carriers. The government is actively engaging with operators. Consultations are ongoing to address all remaining issues.