BY COBHAM NSA – The Chairman of Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, says there is nothing to worry about because the new tax laws will not hurt the nation’s aviation industry as being speculated in certain quarters.
Assuredly, Oyedele said the reforms are designed to ease, rather than worsen, the long-standing financial challenges facing airline operators in the country.
Accordingly, the Committee insisted that contrary to concerns raised by some groups and individuals, the new tax regime is a critical part of the solution to the industry’s problems in the country.
The Committee explained that several long-standing cost drivers have either been resolved or are being structurally addressed by the new laws.
However, despite acknowledging the genuine difficulties confronting the aviation sector, particularly the burden of multiple taxes, levies and regulatory charges, the Committee said there has been extensive engagement with airline operators and other industry stakeholders, and the consultations are ongoing.
In a statement issued on behalf of the Federal Government, the Committee also explained issues around the withholding tax on aircraft leases, describing the existing 10 per cent rate as the single biggest tax burden on airlines.
According to the statement: “The single biggest tax burden on airlines has been the 10 percent Withholding Tax (WHT) on aircraft leases under the existing law. This has now been removed and replaced with a rate to be determined in a regulation, creating the legal basis for either a full exemption or a significantly lower rate.
“To put this in context, on a $50 million aircraft lease, an airline currently pays $5 million in WHT, which is non-recoverable and therefore directly increases operating costs and strains cash flow. Eliminating this burden is a major structural relief for the sector.”
Additionally, the Committee, in clarifying changes to Value Added Tax (VAT), explained that while the temporary VAT suspension introduced after COVID-19 appeared attractive, it created hidden costs because airlines could not recover input VAT on certain assets, consumables and overheads.
Oyedele further said that under the new laws, airlines will become fully VAT-neutral, with all input VAT on imported or locally sourced goods and services fully claimable. The law also mandates VAT refunds within 30 days, supported by a fully funded tax refund account, or allows credits to be offset against other tax liabilities.
Addressing issues concerning import duties, the Committee said, “Existing exemptions on commercial aircraft, engines, and spare parts remain fully in place.”, adding that, “There is no reversal or new burden introduced under the tax reforms.”
The Committee, while allaying fears of likely hike in ticket prices, noted that airline operations are typically low-margin and that a 7.5 per cent VAT on tickets, within a system where input VAT is fully recoverable, would have a significantly lower net impact than suggested.
It also explained that even in a worst-case scenario where VAT is not claimable, the maximum increase would still be limited to 7.5 per cent, meaning a ₦125,000 ticket would rise to about ₦134,375, while a ₦350,000 ticket would increase to approximately ₦376,250.
For the Corporate Income Tax (CIT), the Committee said the new law provides a framework for reducing the rate from 30 per cent to 25 per cent, a move expected to benefit airlines, stressing that several profit-based levies, including the Tertiary Education Tax, NASENI, NITDA and Police levies, have been harmonised into a single Development Levy, reducing complexity and improving certainty.
Also appreciating the long-standing issue of multiple levies and charges imposed on airlines and tickets, Oyedele noted that these were not created by the new tax laws, noting that government is actively engaging operators and relevant agencies to find lasting solutions to the existing and emerging challenges.
The Committee said tax harmonisation provisions in the new framework mean the situation can only improve from 2026, even as it assured Nigerians that the new tax laws provide a strong legal and policy foundation to address the aviation sector’s tax challenges, reduce operating costs for airlines and minimise the impact on passengers.
While cautioning that claims not grounded in fact do not aid the reform process, the Committee said sustained engagement with relevant stakeholders would help resolve remaining non-tax issues in the industry.
