Tax Advisory: Reinstatement of VAT & Duties in Nigeria’s Aviation Sector (Effective January 2026)

As part of the newly enacted Nigeria Tax Reform Acts (2025), the Federal Government will, effective January 1, 2026, reinstate Value Added Tax (VAT) and customs duties on:

• Domestic airline tickets (7.5% VAT)
• Imported aircraft, engines, spare parts, and maintenance equipment

These changes reverse previous exemptions and are part of broader fiscal reforms aimed at increasing Nigeria’s tax-to-GDP ratio and consolidating tax administration under the new Nigeria Revenue Service (NRS) and Joint Revenue Board.

Key Implications for Airlines

• Increased Costs: VAT and duties on aircraft imports and critical parts raise upfront operating costs.
• Cash Flow Pressure: Recovery of input VAT is uncertain given Nigeria’s FX challenges and slow refund processes.
• Fare Impact: Airlines may pass on costs to consumers, potentially reducing demand on domestic routes.
• Maintenance Risk: Higher tax burden may lead to delayed maintenance—raising potential safety concerns.

Recommendations for Policy Makers

1. Zero-rate international flights to align with global norms.
2. Phase in VAT on domestic tickets, with temporary rate caps and review mechanisms.
3. Restore targeted exemptions for safety-critical aircraft inputs.
4. Consider a fixed per-passenger charge as an alternative to VAT on domestic tickets.
5. Digitize and fast-track VAT refunds to ease cash flow pressures.
6. Align implementation with macroeconomic conditions, especially FX access and inflation.

Conclusion

The reinstatement of VAT and duties in aviation reflects Nigeria’s push to expand its fiscal base, but the sector’s fragility calls for measured implementation. Poorly timed taxation could reduce connectivity, raise fares, and deter investment. A balanced, globally-aligned approach is essential.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Inner Konsult Ltd at www.innerkonsult.com at Lagos, Ogun state Nigeria offices. You can also reach us via WhatsApp at +2348038460036.