The Federal Government has stated that there is no going back on the full implementation of the new Tax Reform Act, which will be effective from January 1, 2026.
This is just as the International Air Transport Association (IATA) faulted the Federal Government for contravening several international treaties it signed with other countries, including the December 2024 Supplementary Act of ECOWAS, which forbids member countries from paying taxes on air passengers and goods.
Speaking at a business webinar organised by Aviation & Allied Business in collaboration with the Nigeria Revenue Service (formerly FIRS), Mrs. Nkechi Umegakwe, an Assistant Director of the agency, said airlines are not different from any company operating in Nigeria.
Daily Trust reports that 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 which will now be liable to VAT from January 1, 2026.
But the FIRS official said VAT would be paid on airline tickets, aircraft engines and spares.
“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 essence, 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.” She said.
The Federal Government had removed airlines from customs duties and VAT payment in the last quarter of 2021.
The Area Manager, West and Central Africa, IATA, Dr. Samson Fatokun, in his contribution as a panelist at the webinar, criticised the government for inconsistencies.
Fatokun argued that the airlines and other operators in the sector were already overburdened with numerous levies and charges, wondering why the government insisted on adding to the current challenges in the sector.
He mentioned the payment of 5 per cent Ticket Sales Charge/Cargo Sales Charge (TSC/CSC) by the airlines as one of the levies the airlines were currently battling with, insisting that the 5 per cent TSC/CSC inflated the price of air tickets and scared away some potential air passengers from the sector.
He also noted that Nigeria, as a full member of the International Civil Aviation Organisation (ICAO), signed a treaty which prohibited payment of VAT in air transportation, reasserting that the aviation industry is cost recovery, not revenue generation.
“Aviation is a global business; there are treaties signed to regulate the global industry. Nigeria, as a member of ICAO, is subjected to the recommendations and regulations of the organisation.”
“The Nigeria tax authority needs to be in the know of international treaties Nigeria entered into with various countries. As it is, we are contravening the treaties we already entered into with the return of VAT for airlines.” He added.
Also, Capt. Samuel Caulcrik, aviation expert, said that the various taxes and levies in the sector were already choking the operators and slowing down the growth of the business in the sector.
Aviation analyst Capt. Samuel Caulcrik, also lamented that the various taxes and levies in the sector were already overwhelming the operators and slowing down the growth of the business in the aviation sector.