Stakeholders Disagree with New Tax Reform as it Relates to Aviation, Insist Industry has International Tariff Obligations

Chinedu Eze

Stakeholders in the aviation industry have called on the Nigeria Revenue Service (NRS) to review its new tax reform as it pertains to the aviation sector so that it will agree with tax components of treaties and regulations Nigeria has signed with international aviation agencies.

The stakeholders said that levies and taxes have been built into the air transport system; so, new tax reform needs to take cognizance of international tax obligations in order to avoid double taxation in the sector.

The matter came to the fore yesterday during a business webinar organized by Aviation and Allied Business in collaboration with FRS on how the new tax reform affects the aviation industry.

The lead speaker at the conference, Assistant Director, FRS, Mrs. Nkechi Umegakwe, identified the new tax obligations in the aviation industry; detailing the taxes businesses, such as commercial aircraft, engines, spare parts, domestic, international flight schedule flight services, business aviation, cargo services and others, saying that airlines are no longer exempted from Value Added Tax (VAT) charged by the NRS (Formerly Federal Inland Revenue Service FIRS), but inputs of aircraft and spare parts as capital investment could be claimable.

In his reaction to the presentation, the International Air Transport Association (IATA) representative for West & Central Africa, Dr. Samson Fatokun, explained that aviation is a global business and that there are already different types of levies, taxes and fees that are being paid by operators at both local and international levels.

He also said that there are treaties signed by the Nigerian government that governs the global aviation industry, adding that “Nigeria is a member of the International Civil Aviation Organisation (ICAO) and that the country is subject to regulations with regards to taxation made by ICAO.”.

He advised that international transportation of passengers cannot be taxed, urging that Nigeria needs to consider the treaties it signed.

He made reference to the Economic Community of West African States (ECOWAS) supplementary tax document, stressing that ECOWAS is not introducing a supplementary tax on air passengers; rather, it has approved a regional strategy to significantly reduce air travel costs within its member states by eliminating non-compliant taxes and implementing a 25% reduction in airport passenger and security charges starting January 1, 2026.

“First is that in the aviation industry we have different types of levies. Let me start by calling them levies; because we distinguish between tax, charge, and fees. These taxes are levies.

“Out there, to the tax authorities, they may think there are a lot of services that are being consumed. Yes, that is true. But one way or the other, most of them are already levied.

“And therefore, someone outside the industry, maybe from the tax office, may think that airlines or the aviation industry is not paying enough for the services that are being consumed, while already they are being levied either in charges, in taxes, or in fees.

“There are treaties that are already made that govern the global aviation industry, even the economic side, the financial side, and the taxation side. There are already some treaties that have already been signed. And Nigeria is a member of ICAO, the International Civil Aviation Organization, which is an organization of the United Nations.

“Nigeria is bound to respect that. But in December, 14th of December, 2024, when our president was the Chairman of ECOWAS; ECOWAS established what we call the Supplementary Act of 14th of December, 2024, that stated that no taxation should be on any transportation of passengers and goods by air in ECOWAS countries.”

Speaking in similar vein, former Rector of the Nigerian College of Aviation Technology (NCAT) Zaria, Captain Samuel Caulcrick, took exception to the tax application, staying that Ticket Sales Charges (TSC) and Cargo Sales Charges (CSC) are the backbone of aviation development funding in Nigeria. 

According to him, the airlines are taxed on working capital, not on flight service and it is supposed to be 5% and this has choked the industry, including cargo freighting businesses and this constitute 92% of the industry costs.

Managing Director/CEO, Pathfinders International Limited, Nkechi Onyenso, wondered how such tax reforms could impact the industry, and its consequent effects on aviation and allied companies.

She however, advised the need for further engagements with stakeholders on the new tax laws.

New tax reform bill, which will take effect from next year, was signed into law on June 26, 2025.