The presidential fiscal policy and tax reforms committee has reassured stakeholders in Nigeria’s aviation sector that the new tax laws are designed to alleviate costs for airlines, not increase them, despite recent concerns over their potential impact on ticket prices.
In a detailed statement, the committee acknowledged the challenges facing the aviation industry, including multiple taxes, levies, and regulatory charges.
It noted that the government has been engaging extensively with airline operators to ensure the reforms address structural issues and improve operational efficiency.
The committee highlighted several provisions in the new tax laws that directly benefit the sector:
It noted that the 10 percent withholding tax on aircraft leases, previously a major cost driver, has been removed and replaced with a flexible rate under new regulations, allowing for potential exemptions or lower charges.
The committee added that airlines will now be fully VAT-neutral, noting that input VAT on imported or locally procured assets, consumables, and services can be claimed, with refunds mandated within 30 days, easing liquidity pressures.
“Exemptions on commercial aircraft, engines, and spare parts remain intact, ensuring no new import burdens are introduced,” it said.
“Even with a 7.5 percent VAT on tickets, the recoverable input VAT ensures that the net impact on fares is minimal. For example, a N125,000 ticket would rise to no more than N134,375 under worst-case assumptions.
“The law allows for a reduction of CIT from 30 percent to 25 percent, while consolidating multiple profit-based levies into a single Development Levy, reducing complexity for operators.”
The committee also clarified that the multiplicity of existing levies on airlines is not created by the new tax laws and that ongoing engagements aim to harmonise and simplify these charges.
The committee noted that the new tax laws provide a robust legal and policy framework to resolve long-standing challenges in the aviation sector, reduce operating costs for airlines, and protect passengers from undue fare increases.
It said stakeholders’ collaboration is expected to further smooth remaining non-tax challenges.
“The new tax laws are not the problem; they are a critical part of the solution,“ the committee said.
