Mkpoikana Udoma
Port Harcourt — Nigeria’s aviation industry is set for significant cost relief as the Federal Government says the new tax laws will reduce, not worsen, the financial burden on airlines, countering fears that the reforms could drive up ticket prices.
In a statement, the Presidential Fiscal Policy and Tax Reforms Committee said the new tax regime directly addresses some of the most damaging cost drivers in the sector, particularly aircraft leasing taxes, VAT inefficiencies, and multiple levies.
“The reform is part of the solution, not the source of the problem,” the Committee said, stressing that engagements with airline operators are ongoing.
One of the most striking changes is the removal of the long-standing 10 per cent withholding tax on aircraft leases, described as the single biggest tax burden on airlines.
Under the previous regime, the tax was non-recoverable and significantly strained airline finances.
“To put this in context, on a $50 million aircraft lease, an airline currently pays $5 million in withholding tax,” the Committee said. “Eliminating this burden is a major structural relief for the sector.”
The Committee also highlighted major changes to Value Added Tax, VAT, noting that airlines will now be fully VAT-neutral. Unlike the previous VAT suspension that embedded hidden costs, the new law allows airlines to recover all input VAT on assets, consumables, and services.
“Any excess input VAT must be refunded within 30 days, backed by a fully funded tax refund account,” the Committee said, adding that this would directly improve liquidity and reduce operating pressure.
On concerns about higher ticket prices, the Committee argued that the impact would be minimal, even under a worst-case scenario.
“A 7.5 per cent VAT on tickets does not translate to the exaggerated price increases being suggested,” it said. “A N125,000 ticket becomes not more than N134,375, while a N350,000 ticket becomes not more than N376,250.”
The new tax laws also provide a pathway to reduce corporate income tax from 30 per cent to 25 per cent, while harmonising multiple profit-based levies into a single Development Levy, a move expected to reduce complexity and uncertainty for airlines.
Addressing complaints about multiple charges, the Committee clarified that these were not introduced by the tax reforms.
“The multiplicity of levies imposed on airlines is real, but these charges are not created by the new tax laws,” it said, noting that government is working with operators and agencies to resolve the issue.
Overall, the Committee maintained that the reforms offer a strong legal framework to stabilise airline operations, cut costs, and protect passengers from excessive fare hikes.
“The new tax laws are not the problem,” the Committee said. “They are a critical part of the solution.”
