Presidential Fiscal Policy and Tax Reforms Committee clarifies Nigeria Tax Act 2025
Clarification
The Nigeria Tax Act 2025 is in force. It does not impose a 25 percent tax on building materials, construction funds, bank balances, or business transactions.
False claims circulating online state that the law will start in 2027 and that it introduces a 25 percent tax on construction related funds. Both claims are incorrect. The Act has commenced and includes measures to reduce housing costs, ease rent pressure, and support real estate development.
Key provisions of the Nigeria Tax Act 2025
- Measures that lower building and property development costs
- Land and buildings are exempt from Value Added Tax under Section 185 l.
- Contractors can recover input VAT on materials, assets, and overheads where VAT applies, which reduces construction costs.
- Construction contracts attract a reduced withholding tax rate of 2 percent, which improves cash flow for developers.
- Mortgage interest is tax deductible for individuals developing an owner occupied residential house under Section 30 2 iv.
- Property owners can deduct rental related expenses such as repairs, insurance, and agency fees under Section 20.
- Direct relief for renters and tenants
- Rent relief allows individuals to claim up to five hundred thousand naira, representing 20 percent of annual rent, under Section 30 2 vi.
- Rent is fully exempt from Value Added Tax under Section 185 l.
- Lease agreements below ten million naira per year, or ten times the annual minimum wage, are exempt from stamp duty under Section 134.
- Incentives for investors and developers
- Individuals pay no capital gains tax on the disposal of a dwelling house or an interest in one under Section 51 1.
- Real Estate Investment Trusts are exempt from companies income tax when they distribute at least 75 percent of income within twelve months after year end under Section 162 c.
- Manufacturing of building materials such as iron, steel, and domestic appliances qualifies for priority sector tax incentives for up to ten years.
- The law provides scope to reduce the companies income tax rate for large businesses from 30 percent to 25 percent under Section 56.
- Protection for workers and small businesses
- Tax on employer provided accommodation is capped at the annual rental value, limited to 20 percent of the employee’s annual gross income under Section 14 6.
- Small companies enjoy zero percent companies income tax, no VAT obligation, and no withholding tax deductions on their invoices and payments.
What the law does not do
- It does not tax money held in bank accounts.
- It does not tax transfers used to buy building materials.
- It does not introduce a 25 percent construction or business cost tax.
- It does not delay implementation to 2027.
Summary
Claims of a new tax on building materials or bank funds are false. The Nigeria Tax Act 2025 introduces targeted reliefs to make housing more affordable, promote real estate development, support local manufacturing of building materials, and increase disposable income for tenants.
Final word
Facts matter. If you hear an alarming claim, ask a simple question. Where is it in the law.
With the new tax framework, housing costs should fall and rent should ease, not rise.
Source
Presidential Fiscal Policy and Tax Reforms Committee
