The New Tax Laws which would take effect by January 2026 have continued to generate mixed reactions across various sectors with the aviation industry expressing concerns over the negative impact of the new tax laws in an already “struggling” industry.
According to the operators, especially the airlines and the aviation service providers, the tax laws appear to be “inordinate” with the progress of the industry.
Daily Trust reports that President Bola Tinubu has signed four tax bills into law. The bills are the Nigeria Tax Bill (Ease of Doing Business), which aims to consolidate Nigeria’s fragmented tax laws into a harmonised statute; the Nigeria Tax Administration Bill, which will establish a uniform legal and operational framework for tax administration across federal, state, and local governments.
Others are the Nigeria Revenue Service (Establishment) Bill, which repeals the current Federal Inland Revenue Service Act and creates a more autonomous and performance-driven national revenue agency — the Nigeria Revenue Service (NRS); and the Joint Revenue Board (Establishment) Bill, which provides for a formal governance structure to facilitate cooperation between revenue authorities at all levels of government.
For the aviation industry, the new tax laws reinstated the payment of value added tax (VAT) on airline tickets, aircraft, aircraft engines and spare parts.
The Federal Government, as far back as 2018, had granted VAT waiver on airlines’ tickets as well as VAT on newly acquired aircraft and parts; the decision that the operators applauded.
But the new tax laws have quashed the exemptions, subjecting airlines to payment of VAT on tickets bought by passengers as well on aircraft, aircraft engines and spares.
Recently, the Airline Operators of Nigeria (AON) through its Vice-President, Mr. Allen Onyema said airlines would begin to fold up as soon as the new tax laws become operational.
“I don’t know who put it there, that we have to go back to the regime of paying custom duties for imported aircraft, custom duties for imported spare parts, VAT of 7.5% for imported aircraft, and even ticket fares. The airlines would die within 48 hours. Within 48 hours. But I am happy that the Minister of Aviation, Mr. Festus Keyamo, has taken it up because if it is ever implemented from January next year, airlines would die. They would just die. It has never been done anywhere before,” he said.
Defending the new tax laws, the Federal Inland Revenue Service (FIRS) stated that airlines are taxed like every other company in Nigeria.
Speaking at a webinar on Nigeria Tax Act 2025 and the Aviation Industry convened by the Aviation and Allied Business Publication, An Assistant Director, Tax Policy and advisory Department, Mrs. Nkechi Umegakwe insisted that the airline sector is a service sector.
According to her, the decision to bring back the VAT on air tickets was “a well-considered decision based on the principle of VAT neutrality.”
“VAT is a levy on the consumers, not the airline company. Airlines are agents of collection. The airline company doesn’t bear the burden of VAT,” she added.
But the International Air Transport Association (IATA) Area Manager for West and Central Africa, Dr. Samson Fatokun who was at the webinar said there were already levies stipulated within the aviation ecosystem.
He stated that any levy being introduced outside those levies would be in contravention of the various international treaties and obligations including the Supplementary Act of 2024 which Nigeria has entered into.
He stressed the need for Nigeria to adjust the tax laws to align with the ECOWAS Supplementary Act of 2024 which was signed by President Tinubu when he was still the Chairman of ECOWAS.
He said, “The aviation industry is a global business, if I’m selling maybe spare parts in Nigeria for example, all my activities may be limited to Nigeria only and everything as laws and regulations made in Nigeria applies to me but in an international sphere, there are treaties that at times regulate global nature of that industry.
“The aviation industry is subject to those regulations and there are treaties already made that govern the global aviation industry even the economic side, financial and the taxation side there are already hundreds of treaties that have already been signed, and Nigeria is a member of the International Civil Aviation Organization (ICAO) which is an organ of the United Nations and Nigeria is a full member, Nigeria is subject also to regulations with regard to taxation of aviation that are being made by those organizations like ICAO.
“So Nigeria is bound to respect that because Nigeria carriers have been flying out and also we have foreign carriers flying here and they are touching several jurisdictions at the same time. So Nigeria has signed those standards and regulations that have been issued by ICAO that apply to taxation.
“We have international transportation, and also domestic transportation. The government said henceforth transportation of passengers will henceforth be subject to VAT and the global regulations which Nigeria is also part of is that international transportation of passengers cannot be taxed, it’s not subject to taxation, Nigeria had signed that, Nigeria approved that.”
He recalled that ECOWAS established the Supplementary Act of 14th December, 2024 that stated that “no taxation should be on any transportation of passengers or goods by air in ECOWAS Countries effective January 1st 2026.”
“That was signed by our President and other Presidents of ECOWAS. So our President cannot sign a Regional Act and our own internal legislation counters it. It doesn’t speak well of us,” he said.
Aviation Consultant, Capt. Samuel Caulcrick stated that the 7.5 per cent VAT payment would amount to double taxation with the existence of Ticket Sale Charge and Cargo Sale Charge (TSC/CSC) which he noted is already choking the industry.
“Aviation should not pay VAT as long as the five per cent TSC and CSC are still there. Those two are the major revenues that drive the industry, all other agencies are all cost recovery. Nobody is putting money, only the passengers and the cargo sector and they are being taxed. It would amount to double taxation to bring back the VAT. Aviation industry should be exempted from paying any charge until TSC, CSC are expunged. I wonder why during the construction of these Bills, nobody mentioned the TSC or CSC.”
Prof. Adua Mustapha, First Professor of Aviation Law in Nigeria stated that the FIRS, by virtue of sections 22 and 23 of the NCAA Act, should consider their stance on VAT.
“The provisions state that no taxation can be deducted from the income of the NCAA Act. If that should be the case, will that now mean that the Federal Inland Revenue Service will now have authority to tax the income of Nigeria Civil Aviation Act, I think they have to review provisions contradicting one another.
“I want to equally refer you to the provisions of the Nigerian Civil Aviation Act 2022, that Section 23 also in incongruous with the provision of the Federal inland Revenue Act, as it would amount to double taxation,” he added.
Mrs. Nkechi Onyeso, Chairperson of Institute of Chartered Secretaries Association of Nigeria (ICSAN) Aviation Sectoral Group said, “There is need for further engagement with stakeholders and core aviation practitioners. Aviation is already a struggling business. It is pretty tight for everyone. They have very low passengers as it is now. The impact of the introduction of VAT on tickets would impact passengers’ flow. There are standard costs the airline has to pay and passengers would be impacted and the VAT would worsen it.
“Aviation business is already going through a lot of challenges due to dollar impact because of the depreciation of the naira. Reintroducing VAT would be a way of promoting the aviation industry. The reform in the tax system is not a bad idea. Change is the only thing in life but there is a need for more stakeholders’ engagement to understand the impact.
Chief Executive Officer of Overland Airways, Capt. Edward Boyo lamented that the aviation industry is “facing adverse taxation that is inordinate with the progress of the country.”
“It appears that aviation is not considered a priority industry or a priority sector, though no fault of anyone but we are not priority but we need to be a priority. The country’s economy is going nowhere without stimulating its aviation industry.
