New Tax Laws are a Solution, Not a Threat to Airlines — Presidential Committee
The Presidential Fiscal Policy and Tax Reforms Committee has dismissed claims that Nigeria’s new tax laws will stifle the aviation industry, asserting instead that the reforms provide “structural relief” to a sector historically burdened by multiple levies.
In a detailed brief released on Wednesday, the Committee clarified that several long-standing tax issues driving up operational costs have been resolved or structurally addressed in the new legislation.
Major Relief: Removal of Withholding Tax on Leases
The Committee identified the 10% Withholding Tax (WHT) on aircraft leases as the single biggest financial burden on Nigerian airlines. Under the previous law, a $50 million lease attracted a non-recoverable $5 million tax, severely straining cash flow.
* The Reform: The 10% rate has been removed and replaced with a flexible regulatory framework, creating a legal basis for full exemptions or significantly lower rates.
VAT Neutrality and Refund Mandates
The Committee noted that while the 2020 COVID-19 VAT suspension was helpful, it created “hidden costs” because airlines could not recover VAT paid on assets and consumables.
* 30-Day Refund Rule: Under the new laws, airlines become “fully VAT-neutral.” Any VAT paid on imported assets or local services is now fully claimable. The law mandates that the government must issue refunds within 30 days through a fully funded tax refund account.
Impact on Passenger Ticket Prices
Addressing fears of skyrocketing airfares, the Committee argued that the 7.5% VAT on tickets would have a minimal net impact because input VAT is now recoverable.
Even in a “worst-case scenario,” the Committee provided a price breakdown to debunk exaggerated claims:
* N125,000 ticket: Should not exceed N134,375.
* N350,000 ticket: Should not exceed N376,250.
Corporate Tax Cuts and Harmonized Levies
The reforms also aim to improve the bottom line for airline operators through:
* Reduced CIT: Corporate Income Tax is set to drop from 30% to 25%.
* Consolidated Levies: Multiple earmarked taxes (Tertiary Education, NASENI, NITDA, and Police levies) have been merged into a single Development Levy to reduce complexity.
Addressing Multiplicity of Charges
While acknowledging that airlines face a confusing array of charges, the Committee emphasized that these were not created by the new tax laws. Instead, the tax harmonization provisions mean the situation for airlines can “only improve, not worsen” from 2026 onwards.
The Committee concluded that the new laws provide the first strong legal framework to resolve decades-old aviation tax challenges and urged industry stakeholders to ground their claims in fact rather than speculation.