Festus Keyamo, Minister of Aviation and Aerospace Development
FG cancels airline VAT exemption, reintroduces charges on aircraft, parts
The Federal Government has ended Value Added Tax (VAT) and duty exemptions for airlines and reinstated taxes on commercial aircraft engines, spare parts and flight tickets.
Implementation kicks off January 1, 2026
At a Business Webinar on Thursday jointly organised by Aviation & Allied Business in collaboration with the Federal Inland Revenue Service (FIRS) themed: ‘Nigeria Tax Act (2025) & The Aviation Industry: Aviation Sector Enlightenment Initiative,’ the Assistant Director, Nigeria Revenue Service (formerly FIRS), Nkechi Umegakwe, explained that the new directive draws strength from the Tax Reforms Act, adding that the implementation will be total.
She said unlike what is currently obtainable, it will become mandatory from January next year for airline operators and other aviation companies to pay the Value Added Tax (VAT) in all of their services and operations. Currently, airlines are exempted from the payment of import duties and VAT on the importation of commercial aircraft, commercial aircraft engines, spare parts, and air tickets, a policy implemented. She insisted that all the above are now liable to VAT from January 1, 2026.
Umegakwe emphasised that VAT is now enshrined in Chapter VI, Chapter VIII-PT IV, the Eleventh and Thirteen Schedules of the Nigerian Tax Act and the relevant provisions of Nigeria Tax Administration Act. The VAT (Modification) Order 2024 continues to be in force while the repeal of the VAT Act and The VAT (Modification) Order, 2021 has been revoked.
She said that under the new tax reforms, various taxes are now harmonised to create a unified system in order to eliminate inconsistencies and drive efficiency, while it also simplified the current tax laws. She said: “VAT is a consumption tax on the goods and services to be borne by the end users and not the suppliers. Once the new tax reforms become operational, whatever you bring in as an airline, aircraft, engines, spare parts, and others. You must pay VAT on them. However, if the taxes are in excess, the airlines can ask for a refund, which would be done within 30 days of request. But, with the new tax reforms, airlines will no longer be exempted from payment of VAT.”
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On the collection of VAT by an agent earning commission only, Sec 21(5) NTA, she said there is currently no provision, but in the new law, an appointed VAT collection agent who does not handle payments for the main supply but earns a commission must be issued a taxable invoice, furnish the purchaser with a copy, and remit the VAT on the related supply. Intermediaries or facilitators who play a role in the sale of goods and earn commission from the transaction can be appointed as VAT agents.
On electronic platforms and digital goods, she said there is currently no provision for tax, but in the new law, where goods are imported or purchased through an online, electronic, or digital platform operated by a non-resident supplier, the VAT due will be collected by the service of its agent at the point of clearance. Such agents are to remit the VAT at the point of clearance upon provision of.
Nigeria commenced its VAT-free policy for aircraft parts in 2020, but about three months after implementation, the Nigerian Customs Service (NCS) restored the collection of 7.5 per cent VAT and sundry charges, which was protested by the Airline Operators of Nigeria. By the end of 2021, following the intervention of the National Assembly, the VAT-free policy was fully implemented and commended by the AON.
Stakeholders react
Industry stakeholders expressed concern over the new law, with Capt. Samuel Caulcrik saying that the various taxes and levies in the sector are already choking operators and slowing down business growth. He said that payment of 7.5 per cent VAT and service charges by airlines would amount to multiple taxation on the industry and called on the government to rescind its decision.
“This will cut off the number of air travellers coming into the industry. If some passengers had already been cut off due to 5 per cent TSC/CSC and an additional 7.5 per cent from VAT, more people would run away from the industry and deplete performance,” he said.
Another stakeholder, Nkechi Onyenso, Managing Director of Pathfinder Securities, said this would likely have a negative impact on the aviation industry and urged for more stakeholder engagement.
She said: “I just want to talk about the possible effect that it may have on private aviation services companies in Nigeria. It’s already a struggling business as it is now. I’m not speaking for the airlines, but because I work with some of them, I see that they have very low passenger numbers as it is now. I’m just wondering about the impact of the introduction of VAT on airline tickets, which will affect ticket prices. How much further will it impact passenger flow for the airlines?
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“We will recall that there are some standard costs that airlines have to pay, but revenue comes from passengers. If this VAT is introduced, I wonder about its impact on passengers. As it is, the aviation industry is already facing challenges due to the naira’s performance in the foreign market because most purchases are done in dollars and pounds. So I’m just wondering if introducing VAT on airline parts, which are mainly paid for in dollars, will promote the aviation industry or pull it down.
“Tax reform is not a bad idea because change is the only constant in life. But I see room for more stakeholder engagement to understand the issues in the aviation industry and how this new tax administration can affect general operations.”
Nigeria’s first aviation lawyer, Prof. Ismail Mustapha, warned that the New Tax Act contradicts existing legal provisions and could result in double taxation, citing sections 22 and 23 of the Civil Aviation Act 2022.
“By virtue of sections 22 and 23 of the Civil Aviation Act 2022, no taxation can be deducted from the income of the aviation sector. The FIRS position contradicts this provision. If applied, it would amount to double taxation. The Federal Inland Revenue has to reconsider because these provisions conflict with one another. This needs urgent legal clarification,” he said.
Nigeria Contravening ICAO, ECOWAS Treaties
–IATA
The International Air Transport Association (IATA) was represented by its Area Manager for West and Central Africa, Dr. Samson Fatokun.
In his contribution, he criticised the government for inconsistencies and for contravening international treaties.
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He said that President Bola Tinubu, who was Chairman of ECOWAS, signed a treaty in December 2024 with other member nations prohibiting taxes on air passengers and cargo, effective January 1, 2026. He also explained that, as a member of the International Civil Aviation Organisation (ICAO), Nigeria signed a treaty prohibiting VAT in air transportation, reiterating that the aviation industry is cost recovery, not revenue generation. He further said operators are already overburdened with numerous levies and charges, citing the five per cent Ticket Sales Charge/Cargo Sales Charge (TSC/CSC) as one of the levies airlines currently contend with.
Fatokun said the Federal Government must understand the difference between taxes, charges, and fees. He explained that these levies exist because tax authorities may perceive multiple services being consumed, even though most are already levied.
“Whether these are taxes or fees, from the tax office perspective, they are already being levied within the aviation industry. Second, the aviation industry is global. If I’m selling spare parts in Nigeria, all my activities may be limited to Nigeria and governed by Nigerian laws and regulations. But when you operate internationally, treaties regulate the industry globally.
“Nigeria is bound by these regulations. We are a member of ICAO, an organ of the United Nations, and must respect international aviation taxation rules. International transport of passengers cannot be taxed, and Nigeria has signed and approved these regulations. Domestic taxation rules must consider treaties already entered into.
“On December 14, 2024, ECOWAS established the Supplementary Act, stating no taxation should apply to air transport of passengers and goods in ECOWAS countries, effective January 1, 2026. Our president signed this agreement. Domestic legislation cannot contradict it.
“Regarding movable assets like aircraft, international regulations stipulate that such assets should not be taxed while operating between countries. Applying domestic tax laws to these movable assets is extremely difficult.”
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