Nigeria Tax Act 2025: FG Clarifies No New Construction or Bank Taxes

Mr. Taiwo Oyedele as the new Minister of State for Finance

Nigeria Tax Act 2025: FG Clarifies No New Construction or Bank Taxes

The Federal Government has dismissed claims that the Nigeria Tax Act 2025 imposes a 25% tax on building materials, construction-related funds, business expenses, or money in bank accounts. The government described the viral video circulating on social media as false and misleading, adding that the law, which has already taken effect, does not postpone implementation until 2027.

Taiwo Oyedele, Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, said the misinformation misrepresents the objectives of the Tax Act, which are to lower housing costs, support real estate development, and encourage economic growth. He clarified that the video’s claims — that the law would start in 2027 and impose a 25% levy on construction transactions — are both inaccurate.

Under the new law, several housing and construction reliefs have been introduced. Land and buildings are exempt from Value Added Tax (VAT) under Section 185(l), while contractors can recover VAT on materials and services, reducing overall construction expenses. The Withholding Tax (WHT) rate on construction contracts has been lowered to 2%, improving cash flow for developers. Individuals building owner-occupied homes can deduct mortgage interest, and property owners earning rental income may deduct expenses such as repairs, insurance, and agency fees. These provisions are designed to make housing projects more affordable and attractive to investors.

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The Act also offers direct support for renters and low-income earners. Eligible tenants can claim rent relief of up to ₦500,000, equivalent to 20% of annual rent, while rent payments are fully exempt from VAT. Lease agreements below ₦10 million per year, or less than ten times the national minimum wage, are also exempt from stamp duty. These measures are expected to increase disposable income for low-income households and reduce the financial burden of housing.

Incentives under the Act extend to investors and businesses in the construction and real estate sectors. Individuals are exempt from Capital Gains Tax when selling a dwelling house or interest in one. Real Estate Investment Trusts (REITs) distributing at least 75% of dividends or rental income within 12 months are exempt from Companies Income Tax. Manufacturers of building materials, including iron, steel, and domestic appliances, may qualify for tax holidays of up to 10 years, while large businesses could see Companies Income Tax reduced from 30% to 25%. These provisions are intended to encourage investment, stimulate local production, and support the growth of the housing sector.

The Tax Act also includes provisions that relieve workers and small businesses. The taxable value of employer-provided accommodation is capped at 20% of an employee’s annual gross income, excluding rental value. Small companies that qualify under the Act will pay 0% Companies Income Tax, are exempt from charging VAT, and are not required to deduct Withholding Tax from invoices and payments. These measures reduce the compliance burden on smaller businesses and support entrepreneurship.

The committee also clarified what the Act does not include. It does not tax money in bank accounts, does not impose 25% taxes on construction costs or building materials, and does not delay implementation until 2027. Officials described claims suggesting otherwise as misleading and urged Nigerians to rely on verified government sources for accurate information. According to the committee, the Tax Act is intended to make housing more affordable, reduce rent, and stimulate economic growth, not to increase taxes on citizens or businesses.