Federal Govt Ends VAT, Duty Exemptions For Airlines, Reinstates Taxes On Aircraft, Spare Parts, And Tickets

The Federal Government has rescinded Value Added Tax (VAT) and duty exemptions for airlines, making commercial aircraft, engines, spare parts, and flight tickets liable for VAT, effective January 1, 2026. The announcement was made during a Business Webinar on Thursday, jointly organised by Aviation & Allied Business and the Federal Inland Revenue Service (FIRS), themed: ‘Nigeria Tax Act (2025) & The Aviation Industry: Aviation Sector Enlightenment Initiative’.

Assistant Director at FIRS, Nkechi Umegakwe, explained that the directive stems from the Tax Reforms Act and represents a total implementation of VAT obligations for airline operators and aviation companies. “VAT is now enshrined in Chapters VI, VIII-PT IV, and the Eleventh and Thirteenth Schedules of the Nigerian Tax Act, while the VAT (Modification) Order 2024 remains in force. Airlines and aviation operators must now pay VAT on aircraft, engines, spare parts, and tickets. Refunds can be claimed within 30 days if taxes are overpaid,” she said.

Umegakwe further clarified that appointed VAT collection agents earning commission must issue taxable invoices, remit VAT, and furnish copies to purchasers. In addition, imports and purchases through electronic or digital platforms operated by non-resident suppliers will now attract VAT, collected by appointed agents at the point of clearance.

Nigeria first introduced a VAT-free policy for aircraft parts in 2020, but the Nigerian Customs Service reinstated VAT three months later, prompting protests from the Airline Operators of Nigeria (AON). The policy was later fully implemented in 2021 following National Assembly intervention.

Industry stakeholders have expressed concern over the move. Capt. Samuel Caulcrik warned that the reintroduction of 7.5 per cent VAT alongside existing levies, including the five per cent Ticket Sales Charge/Cargo Sales Charge (TSC/CSC), could stifle the aviation industry and reduce passenger numbers.

Nkechi Onyenso, Managing Director of Pathfinder Securities, cautioned that VAT on airline tickets could further depress passenger flow, especially as the industry already struggles with low numbers and foreign currency pressures. She called for greater stakeholder engagement to understand the impact of the new tax regime.

Prof. Ismail Mustapha, Nigeria’s first aviation lawyer, argued that the new VAT provisions contradict Sections 22 and 23 of the Civil Aviation Act 2022, potentially resulting in double taxation. He urged the Federal Inland Revenue Service to reconsider, citing conflicts with existing legal provisions.

The International Air Transport Association (IATA), represented by Dr. Samson Fatokun, Area Manager for West and Central Africa, also raised concerns over inconsistencies and potential violations of international treaties. Fatokun noted that Nigeria, as a member of the International Civil Aviation Organisation (ICAO) and ECOWAS, has committed to exempting air passengers and cargo from taxes under treaties signed in December 2024, effective January 1, 2026.

“Domestic VAT laws cannot contradict international and regional agreements,” Fatokun said. “Movable assets such as aircraft, operating between countries, should not be taxed under international regulations. Nigeria must reconcile domestic taxation rules with its global obligations.