New Tax Laws Will Ease Airlines’ Burden — Presidential Panel

The Presidential Fiscal Policy and Tax Reforms Committee has assured that the new tax laws will support and ease the burden on airline operators rather than worsen their situation, contrary to fears expressed within the aviation industry.

In a statement on Monday, the Committee acknowledged the challenges confronting the aviation sector, including multiple taxes, levies and regulatory charges, but said the reforms were designed to resolve long-standing structural problems that have driven up operating costs for years.

“Contrary to the claim that the new tax laws will hurt the industry, the reform is part of the solution, not the source of the problem,” the Committee chaired by Taiwo Oyedele stated. “Several long-standing tax issues driving costs in the sector have been resolved in the new tax laws or are being structurally addressed.”

According to the Committee, one of the most significant changes under the new law is the removal of the 10 percent withholding tax on aircraft leases, described as the single biggest tax burden on airlines. The tax has now been replaced with a rate to be determined by regulation, providing legal grounds for either a full exemption or a much lower rate.

“To put this in context, on a $50 million aircraft lease, an airline currently pays $5 million in withholding tax, which is non-recoverable and directly increases operating costs,” the Committee explained. “Eliminating this burden is a major structural relief for the sector.”

The Committee also clarified that the new law restores full value-added tax (VAT) neutrality for airlines. Under the old regime, the temporary VAT suspension introduced during the COVID-19 pandemic meant airlines could not recover input VAT on certain goods and services, effectively embedding those costs into operations.

With the reforms, airlines will now be able to claim VAT paid on imported or locally procured assets, consumables and services. “Where an airline has excess input VAT, the law mandates a refund within 30 days, supported by a fully funded refund account,” the Committee said. “This directly reduces cost pressure and improves liquidity.”

It further noted that all existing exemptions on commercial aircraft, engines and spare parts remain fully in place, stressing that no reversal or additional burden was introduced.

On concerns about potential ticket price increases, the Committee said the actual impact would be far less than feared. It explained that a 7.5 percent VAT on tickets, in a system where airlines can fully recover input VAT, would have minimal effect on passengers. “Even in a worst-case scenario where VAT were not claimable, the maximum impact would still be 7.5 percent,” the statement noted. “A ₦125,000 ticket becomes not more than ₦134,375 and a ₦350,000 ticket not more than ₦376,250.”

The Committee added that the new law provides a framework to reduce corporate income tax from 30 percent to 25 percent, a change that will benefit airlines. In addition, several profit-based levies including the Tertiary Education Tax, NASENI, NITDA and Police levies have been harmonised into a single Development Levy, reducing complexity and improving certainty for taxpayers.

While acknowledging the reality of multiple charges imposed on airlines by different agencies, the Committee emphasised that such levies were not created by the new tax laws. “It is therefore incorrect to attribute them to the reform,” it said. “Government is actively working with operators and relevant agencies to achieve a lasting solution. Importantly, the tax harmonisation provisions in the new laws mean the situation can only improve, not worsen, from 2026.”

In its conclusion, the Committee reaffirmed that the new tax laws were designed to strengthen the aviation sector rather than stifle it. “Overall, the new tax laws provide a strong legal and policy framework to resolve long-standing tax challenges in the aviation sector, reduce operating costs for airlines, and ensure minimal impact on passengers,” it said.

It urged stakeholders to continue engaging constructively with government. “If the current engagement with industry stakeholders is sustained, the remaining non-tax issues will be resolved sooner rather than later,” it added. “Claims not grounded in fact do not help this process. The new tax laws are not the problem, they are a critical part of the solution.”