The Presidential Fiscal Policy and Tax Reforms Committee has dismissed claims that Nigeria’s new tax laws will hurt the aviation industry, insisting that the reforms are designed to reduce operating costs for airlines and bring long-term relief to the sector.
The Committee acknowledged the long-standing challenges facing the aviation industry, particularly the burden of multiple taxes, levies and regulatory charges.
It noted that government has been engaging extensively with airline operators and other stakeholders, adding that the consultations are ongoing.
According to the Committee, the new tax regime addresses several structural issues that have historically driven up costs for airlines and constrained cash flow.
One of the most significant changes is the removal of the 10 per cent withholding tax (WHT) on aircraft leases under the existing law. The Committee explained that the tax, which had been the single biggest tax burden on airlines, has now been replaced with a rate to be determined by regulation. This, it said, creates room for either a full exemption or a substantially lower rate.
“To put this in perspective, on a $50 million aircraft lease, an airline currently pays $5 million in non-recoverable withholding tax. Removing this burden provides major structural relief to the sector.”
On Value Added Tax (VAT), the Committee said the reforms move the industry from what it described as “hidden costs” to full VAT neutrality. While airlines benefitted from a temporary VAT suspension introduced in 2020 after COVID-19, the Committee said the policy prevented them from recovering input VAT on non-exempt items, leading to VAT being embedded in operating costs.
Under the new laws, airlines will be able to fully claim VAT paid on imported or locally procured assets, consumables and services. Where excess input VAT exists, refunds are mandated within 30 days through a fully funded tax refund account, with the option to offset VAT credits against other tax liabilities.
The Committee also clarified that existing import duty exemptions on commercial aircraft, engines and spare parts remain unchanged, stressing that no new import-related burdens have been introduced under the reforms.
Addressing concerns over ticket prices, the Committee said airline operations are inherently low-margin and that a 7.5 per cent VAT on tickets, within a fully recoverable VAT system, would have a far lower net impact than widely suggested. It explained that even in a worst-case scenario where VAT is not recoverable, the maximum impact would still be limited to 7.5 per cent.
“For example, a ₦125,000 ticket would rise to not more than ₦134,375, while a ₦350,000 ticket would increase to not more than ₦376,250,” the Committee stated.
On corporate taxation, the new law provides a framework to reduce Corporate Income Tax from 30 per cent to 25 per cent, a move expected to benefit airlines. In addition, several profit-based levies — including Tertiary Education Tax, NASENI, NITDA and Police levies — have been harmonised into a single Development Levy, reducing complexity and improving certainty.
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 said government is working with operators and relevant agencies to achieve a lasting solution, noting that tax harmonisation provisions in the reforms mean the situation “can only improve, not worsen,” from 2026.
The Committee maintained that the new tax laws provide a strong legal and policy framework to resolve long-standing tax challenges in the aviation sector, lower operating costs for airlines and ensure minimal impact on passengers.
“If 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 the process. The new tax laws are not the problem; they are a critical part of the solution”, it added.
