The Federal Government has affirmed its commitment to fully implement the new Tax Reforms Act, which will take effect from January 1, 2026, insisting that all airline operators must now pay Value Added Tax (VAT) on their services and operations.
This announcement comes despite objections from the International Air Transport Association (IATA), which accused the government of violating several international agreements, including the December 2024 Economic Community of West African States (ECOWAS) treaty.
This treaty prohibits member states from imposing taxes on air passengers and cargo.
At a recent business webinar themed “Nigeria Tax Act (2025) & The Aviation Industry: Aviation Sector Enlightenment Initiative”, jointly hosted by Aviation & Allied Business and the Federal Inland Revenue Service (FIRS), stakeholders described the new tax measures as a form of multiple taxation on the aviation sector.
Mrs. Nkechi Umegakwe, Assistant Director at the Nigeria Revenue Service (formerly FIRS), who was the lead presenter at the event, emphasized that the government had carefully reviewed the new tax laws before their enactment.
She stated categorically that airline operators and related businesses would be required to pay VAT on all services from the start of 2026.
Currently, airlines are exempt from paying import duties and VAT on the importation of commercial aircraft, engines, spare parts, and air tickets. Under the new law, however, these exemptions will be removed, and VAT will apply.
Umegakwe explained that the reforms aim to increase government revenue, reduce business costs through VAT recovery mechanisms, improve cash flow for businesses, and enhance tax compliance via digital invoicing and tracking.
The reforms also seek to harmonize different taxes under a unified system to improve efficiency and simplify existing tax laws.
She stated: “VAT is a consumption tax paid by the final consumer, not the supplier. Airlines must pay VAT on imported aircraft, engines, and spare parts starting January 1, 2026. However, they can request refunds within 30 days.”
The Federal Government had previously exempted airlines from customs duties and VAT in late 2021.
Dr. Samson Fatokun, Area Manager for West and Central Africa at IATA, criticized the government’s position, highlighting that airlines already face a heavy tax burden, including a 5% Ticket Sales Charge/Cargo Sales Charge (TSC/CSC). He argued this levy inflates ticket prices and deters passengers.
Fatokun also noted that President Bola Tinubu, as ECOWAS Chairman in December 2024, signed a treaty banning taxes on air passengers and cargo starting January 1, 2026. Nigeria is also bound by the International Civil Aviation Organisation (ICAO) treaties, which prohibit VAT on air transportation, since aviation is regarded as a cost-recovery industry rather than a revenue-generating sector.
He warned that reinstating VAT for airlines would contravene these international agreements.
Aviation expert Capt. Samuel Caulcrik expressed concerns that the combined impact of VAT and existing levies such as the TSC/CSC amounted to multiple taxation, which hampers growth in the sector.
He stressed that additional taxes would reduce passenger numbers and hurt the industry.
Mrs. Nkechi Onyenso, Managing Director of Pathfinder Securities, called for ongoing dialogue between the government and aviation stakeholders.
While acknowledging the potential benefits of the Tax Reforms Act, she pointed out that challenges such as foreign exchange shortages and multiple taxes continue to negatively affect the aviation industry.
