Key Takeaways:
- The Presidential Fiscal Policy and Tax Reforms Committee says the new laws aim to reduce costs for carriers, emphasising that the changes are part of the solution, not the problem.
- Under the Nigeria aviation tax reforms, VAT on tickets is refundable and input VAT on assets and services will be fully claimable, limiting net fare impact.
- Import duty exemptions for aircraft, engines and spare parts remain intact and a fully funded tax refund account will speed refunds.
- Government and airline operators continue talks to resolve legacy levies and improve liquidity across the sector.
The Presidential Fiscal Policy and Tax Reforms Committee has rejected claims that new tax laws due to take effect on 1 January will harm Nigeria’s aviation industry, insisting the measures are intended to ease costs and relieve long-standing operational pressures.
Nigeria aviation tax reforms and the impact on fares
In a statement posted to its official X account, the Committee said the reforms form part of the solution to the sector’s difficulties rather than the source of them. It acknowledged that airline operations remain low-margin and that the burden of multiple taxes, levies and regulatory charges has been a genuine challenge for operators.
“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 Committee said, adding that government engagement with airline operators has been extensive and is ongoing.
The Committee disputed fears about the reintroduction of a 7.5 per cent value added tax on tickets, saying the headline rate overstates the likely net impact where input VAT is fully recoverable. It provided simple examples to illustrate its point: a ₦125,000 ticket would rise to no more than ₦134,375 and a ₦350,000 ticket to no more than ₦376,250 even in a worst-case scenario where VAT could not be claimed.
Under the new framework, airlines will be fully VAT-neutral because VAT paid on imported or locally procured assets, consumables and services will be claimable. Where an airline has excess input VAT, the law requires a refund within 30 days, supported by a fully funded tax refund account, the Committee said. Airlines will also be able to offset VAT credits against other tax liabilities, a move expected to improve liquidity.
The Committee emphasised that existing import duty exemptions on commercial aircraft, engines and spare parts remain in place. It said the reforms do not introduce any new import duty burden on airlines.
Those assurances follow warnings from the Chief Executive Officer of Air Peace, Allen Onyema, who said the Nigeria Tax Act could reintroduce a 7.5 per cent VAT on aircraft imports, engines and spare parts that were suspended in 2020. Onyema argued this could push domestic economy fares from about ₦350,000 to over ₦1 million. Other prominent figures, including former presidential candidates Peter Obi and Atiku Abubakar, have also urged a review of the laws.
The Committee acknowledged the multiple levies and charges that appear on tickets, but said those were not created by the new tax laws. It said the government is working with airline operators and relevant agencies to find a lasting solution to the cumulative effect of those charges.
Industry stakeholders will be watching the implementation closely. The Committee’s assurances about VAT neutrality, time-bound refunds and the ability to offset credits are intended to limit short-term disruption and help stabilise cash flow for carriers as the changes take effect in January.
As talks continue, airlines, regulators and the government will need to ensure that administrative processes are efficient and that refunds and offsets work as intended to deliver the promised relief to a sector that has long operated on thin margins.
