Aviation Stakeholders Fret over New Tax Regime, Seek Review to Curb Bankruptcy

Chinedu Eze

Stakeholders in the aviation industry have urged the federal government to review the new tax regime, which will take effect from January 2026, saying it will bankrupt airlines and other businesses in the sector, if not revised to dovetail with industry standards.

According to the Federal Inland Revenue Service (FIRS), in January 2026, when the new tax reforms will kick off, aviation assets such as commercial aircraft, engines, spare parts and airline transportation will no longer be exempted from Value Added Tax (VAT).

The agency explained that the implications of the new Tax Laws on Aviation meant that Nigerian companies engaged in airline transportation business and other allied companies in aviation sector would be taxed like any other Nigerian company.

But stakeholders said that levies have been built into the air transport system, adding that the new tax reform needs to take cognisance of international tax obligations in order to avoid double taxation in the sector.

They noted that currently operating airline business in Nigeria remained precarious due to high taxation and other disincentive factors, including high insurance premium, high cost of spares due to the high exchange rate and the cost of aircraft maintenance overseas.

When the matter came to the fore recently, the International Air Transport Association (IATA) representative for West & Central Africa, Dr. Samson Fatokun, explained that aviation remained a global business and that there were already different types of levies, taxes and fees being paid by operators at both local and international levels.

He also said that there were 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.”

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

The IATA representative argued that Nigeria cannot introduce tax regime in isolation because the country is part of the global system that aligns with international standards in the aviation industry.

He noted that the Economic Community of West African States (ECOWAS) was already reviewing the tax system in other to reduce the cost of flights across the sub-region. He said the new tax regime introduced by Nigeria would not dovetail with the downward review of taxes and charges to reduce the cost of fares flying across West African destinations.

“ECOWAS has approved a regional strategy to significantly reduce air travel costs within its member states by eliminating non-compliant taxes and implementing a 25 per cent reduction in airport passenger and security charges starting January 1, 2026,” he explained.

Industry analyst and the Managing Director of Flights and Logistics Solutions Limited, Mr. Amos Akpan, gave details of the current taxes and charges paid by airlines in Nigeria.

They include: Cargo sales tax five per cent of revenue charged on cargo carried; Passenger sales tax five per cent on revenue charged on passenger carried; Charter sales tax five per cent of revenue charged per charter flight; Passenger service charge Flat fee of N3,000 – N7,500 collected from checked in passenger by airlines and remitted to Federal Airport Authority of Nigeria or state Airport as agreed, depending on the airport and Federal Inland Revenue tax on company’s audited account 30 per cent on profit.

Others include: Customs import duty tax on imported aircraft; State Inland Revenue company tax on airlines that have offices in states and Fuel tax per litre of fuel lifted at N2.50Kper litre.

Akpan explained and gave an example that if a passenger buys a one-way ticket: the base fare is N148,000, but total added taxes are N55,000 – off peak season sales(May/June).

He added that customs subtly reintroduced some charges which ought to have been waived, as agreed by the federal government, because customs import duty is still paid by most airlines to clear imported aircraft spare parts at the cargo airport terminals.

On Monday, at the kick-off of the international air show to mark 100 years of aviation in Nigeria, the Vice-President of Airline Operators of Nigeria (AON) and the Chairman/CEO of Air Peace Airlines Limited, Dr. Allen Onyema, said the proposed tax law would cripple airlines in the country if implemented.

He noted that the airlines were already paying so much taxes and any increase will force them into bankruptcy.

The Managing Director/CEO of Aero Contractors Limited, Captain Ado Sanusi, told THISDAY in a telephone interview that the tax regime would unintentionally undermine the aviation industry and cripple airline business.

“This is because high taxation, which will be transferred to the passengers, will make the fares exorbitant and this will lead to the reduction of the number of people that travel by air. When fewer numbers of people travel by air it will impact on the revenue of the airlines and force them to reduce capacity,” he said.

Sanusi also referred to the ICAO Document 8632 policy, which insisted that airlines must not face double taxation and government should not impede airlines’ connectivity and revenue earned in aviation should be ploughed back to develop the industry.

He said that any tax regime that adds to the fare paid by passengers will automatically lead to 4 to 6 percent reduction in passenger demand.

Sanusi said the new taxes would also lead to reduction of VAT, force airlines to reduce staff, which would further reduce PAYEE taxes from the workers. “It will also have impact on the revenue earned by the Nigeria Airspace Management Agency (NAMA) and the Federal Airports Authority of Nigeria (FAAN) as passenger throughput drops. This will also undermine job creation and even have negative effect on tourism, “he added.

Meanwhile, there are indications that FIRS may meet with airlines operators to tinker with the new tax policy in order to ensure that airlines and other business in the aviation industry are not forced out of the business.