Yemi Obafemi
The Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedelehas said the new tax reforms scheduled to take effect from January 1, 2026, are designed to ease the long-standing financial burden on Nigeria’s aviation industry rather than worsen it.
In a statement, the committee said it recognises “the genuine challenges facing Nigeria’s aviation industry, particularly the burden of multiple taxes, levies, and regulatory charges,” adding that government engagement with airline operators has been extensive and is ongoing.
Chairman of the committee, Taiwo Oyedele, dismissed claims that the new tax laws would hurt the sector, insisting that “the reform is part of the solution, not the source of the problem.”
According to the committee, one of the most significant reliefs for airlines is the removal of the existing 10 per cent withholding tax on aircraft leases. It said the tax has been replaced with a rate to be determined by regulation, providing a legal basis for either a full exemption or a much lower rate.
“The single biggest tax burden on airlines has been the 10 per cent withholding tax on aircraft leases under the existing law,” the committee stated. “This has now been removed, creating room for substantial relief.”
It explained that under the current regime, an airline leasing an aircraft worth $50 million pays about $5 million in non-recoverable withholding tax, a cost that directly increases operating expenses and strains cash flow. “Eliminating this burden is a major structural relief for the sector,” the committee said.
On Value Added Tax (VAT), the committee noted that while the temporary VAT suspension introduced in 2020 after COVID-19 appeared attractive, it came with hidden costs. “Airlines could not recover input VAT on several non-exempt items, meaning VAT became embedded in costs,” it said.
Under the new tax laws, airlines will become fully VAT-neutral. “Any VAT paid on imported or locally procured assets, consumables, and services will be fully claimable,” the committee said.
The committee also clarified that existing import duty exemptions on commercial aircraft, engines, and spare parts remain fully in place. “There is no reversal or new burden introduced under the tax reforms,” it stressed.
Addressing concerns over ticket prices, the committee said aviation operations are inherently low-margin and that the impact of VAT on fares has been exaggerated.
“A 7.5 per cent VAT on tickets, within a system where input VAT is fully recoverable, results in a significantly lower net impact than the headline rate suggests,” it said.
It added that even in a worst-case scenario where VAT is not claimable, “the maximum impact would still be 7.5 per cent, not the price increases being suggested.” According to the committee, “a ₦125,000 ticket becomes not more than ₦134,375, while a ₦350,000 ticket rises to about ₦376,250.”
On corporate taxation, the committee said the new law provides a framework to reduce corporate income tax from 30 per cent to 25 per cent, which would benefit airlines. It added that several profit-based levies, including Tertiary Education Tax, NASENI, NITDA and Police levies, have been harmonised into a single Development Levy. “This reduces complexity and ensures certainty for businesses,” it said.
While acknowledging the reality of multiple levies and charges imposed on airlines and flight tickets, the committee stressed that these were not created by the new tax laws. “It is incorrect to attribute them to the reform,” it said, adding that government is actively working with operators and relevant agencies to achieve a lasting solution.
The committee concluded that the new tax laws provide “a strong legal and policy framework to resolve long-standing tax challenges in the aviation sector, reduce operating costs for airlines, and ensure minimal impact on passengers.”
It added, “If the current engagement with industry stakeholders is sustained, the remaining non-tax issues will be resolved sooner rather than later. Claims not grounded in fact do not help this process. The new tax laws are not the problem; they are a critical part of the solution.”
