Tax reforms committee says new laws will resolve aviation sector challenges

By Abubakar Yunusa

The presidential fiscal policy and tax reforms committee says Nigeria’s new tax laws will help resolve long-standing challenges in the aviation sector.
The committee, in a post on X by Taiwo Oyedele, its chairman, acknowledged the genuine difficulties facing the industry, particularly the burden of multiple taxes, levies, and regulatory charges.
The fiscal policy committee said the federal government, through the committee, has been engaging extensively with airline operators and other stakeholders, adding that consultations are ongoing.
“Contrary to the claim that the new tax laws will hurt the industry, the reform is part of the solution, not the source of the problem,” the post reads.
“Several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed.”
According to the committee, one of the most significant cost burdens on airlines — the 10 percent withholding tax (WHT) on aircraft leases — has been removed under the new tax laws.
The WHT has now been replaced with a rate to be determined by regulation, creating legal basis for either a full exemption or a substantially 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,” the committee added.
The committee also said under the new tax laws, airlines will become fully VAT-neutral, with VAT paid on imported or locally procured assets, consumables, and services now claimable.
Also, the committee explained that while the temporary VAT suspension introduced in 2020 after COVID-19 appeared beneficial, it resulted in hidden costs because airlines were unable to recover input VAT on certain assets, consumables, and overheads.
“Where an airline has excess input VAT, the law mandates a refund within 30 days, supported by a fully funded tax refund account and the option to offset VAT credits against other tax liabilities. This directly reduces cost pressure and improves liquidity,” the committee said.
The tax reforms committee added that existing exemptions on commercial aircraft, engines, and spare parts remain fully intact under the reforms, with no new import duties introduced.
Addressing concerns over ticket prices, the committee said airline operations are inherently low-margin.
“A 7.5 percent VAT on tickets, within a system where input VAT is fully recoverable, results in a significantly lower net impact than the headline rate suggests. Even in a worst-case scenario where VAT were not claimable, the maximum impact would still be 7.5 percent, not the price increases being suggested,” the post said.
“That is, a N125,000 ticket becomes not more than N134,375 and a N350,000 ticket not more than N376,250.”
The committee also said the new laws provide a framework to reduce corporate income tax from 30 percent to 25 percent, which would benefit airlines.
The group added that several profit-based levies — including those for tertiary education, NASENI, NITDA, and police funds — have been harmonised into a single development levy, reducing complexity and ensuring certainty.
While acknowledging the existence of multiple levies imposed on airlines and flight tickets, the committee said the charges were not introduced by the new tax laws.
The fiscal policy committee said attributing them to the reforms was incorrect, adding that the government is working with operators and relevant agencies to achieve a lasting solution.
“Importantly, the tax harmonisation provisions in the new laws mean the situation can only improve, not worsen, from 2026,” the committee said.
“Overall, the new tax laws provide a strong legal and policy framework to resolve the long-standing tax challenges in the aviation sector, reduce operating costs for airlines, and ensure minimal impact on passengers.”
The committee added that sustained engagement with industry stakeholders would help resolve remaining non-tax issues, warning that claims not grounded in fact could undermine progress.