Nigeria Tax Act 2025: Setting the Record Straight on Housing, VAT and the ‘25% Tax’ Claim

By Joe Ikechukwu

Misinformation has long been described by scholars as more than just falsehood, it is said to be an epistemic, social and ethical harm capable of weakening public trust and destabilising institutions. When such misinformation comes from influential political actors, its impact can be even more profound, shaping public perception and fuelling unnecessary anxiety.

That was the backdrop to recent controversy surrounding the Nigeria Tax Act 2025, following claims that the law introduces a 25 per cent tax on building materials, construction funds and related transactions.

NRS Debunks 25% Tax Allegation

The Nigeria Revenue Service (NRS) has categorically dismissed the circulating claims as false and misleading.

In a public notice dated February 16, 2026, the Service clarified that the Nigeria Tax Act 2025 has already commenced and does not impose any 25 per cent tax on building materials, housing funds, construction costs or financial transfers linked to property development.

According to the NRS, the Act was designed to reduce financial pressure, not increase it.

The clarification followed the circulation of a campaign video in which former Rivers State Governor and ex-Minister of Transportation, Rotimi Amaechi, suggested that the Act would take effect in 2027 and impose additional tax burdens on the housing sector.

The Service described those assertions as inaccurate and urged Nigerians to rely only on verified information from official government channels.

Core Objective of Nigeria Tax Act 2025: Lower Housing Costs

Far from introducing new levies, the Nigeria Tax Act 2025 aims to: Reduce the cost of housing, Encourage real estate and construction investment, Improve affordability for tenants and homeowners and to Stimulate broader economic participation.

The NRS emphasised that the law contains targeted reliefs and incentives specifically tailored to support the housing and construction value chain.

Key Housing and Construction Incentives

VAT Exemptions: One of the most significant provisions is the removal of Value Added Tax (VAT) on: Sale of eligible residential properties, Lease of residential properties, Rent (both residential and commercial) and Supply of eligible building and construction inputs (under specified conditions). This development means that Nigerians buying land, completed buildings or paying rent will no longer pay VAT on those transactions.

Mortgage Interest Relief: The Act allows mortgage interest deductions of up to ₦8 million for owner-occupied homes, improving access to home ownership and lowering effective borrowing costs.

Withholding Tax Reduction: The Withholding Tax rate on construction contracts has been reduced to 2 per cent, enabling developers to retain more working capital during project execution.

Capital Gains Tax Exemption: Individuals disposing of a dwelling house or an interest in one will no longer pay Capital Gains Tax, encouraging property investment and market activity.

Rent Relief for Tenants: Eligible individuals can claim rent relief of up to ₦500,000, capped at 20 per cent of annual rent, increasing disposable income for low and middle income earners.

Stamp Duty Exemption: Lease agreements valued below ₦10 million (or ten times the annual minimum wage) are exempt from stamp duty, lowering tenancy documentation costs for individuals and small businesses.

Incentives for Small Businesses: With the new tax law small companies will benefit from: 0% Companies Income Tax, VAT exemption obligations and No Withholding Tax deductions on invoices.

These measures according the NRS is aimed at supporting small contractors, suppliers and developers within the housing ecosystem.

Oyedele: “Fact Not Fear”

Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, reinforced the NRS position, stating that the Act does not tax bank balances, construction transfers or business expenses.

According to Oyedele, land, buildings and rent are now fully exempted from VAT, a move expected to lower overall property transaction costs and ease accommodation pressures nationwide.

He also clarified that there is no postponement to 2027, contrary to claims circulating online.

“Contrary to the misinformation seeking to create fear, panic and disaffection, the Nigeria Tax Act 2025 has already commenced and does not impose a 25 per cent tax on construction funds, bank balances, or business expenses,” he stated.

Concluding with a call for critical engagement rather than panic, Oyedele urged Nigerians to verify alarming claims directly against the provisions of the law.

Strengthening Trust Through Transparency

The NRS reaffirmed its commitment to transparency and effective implementation of the Nigeria Tax Act 2025. According to the Service, the broader objective remains clear: Strengthen the economy, Improve housing affordability, Encourage investment and Safeguard public interest.

It is important to therefore state that the central message from tax authorities is unambiguous: the Nigeria Tax Act 2025 is structured to lower costs and not to impose a 25 per cent construction tax.

Joe Ikechukwu writes from Abuja.