VAT Exempt for Land, Properties, and Rent — Oyedele

Key Changes in the Nigeria Tax Act 2025

The Nigeria Tax Act 2025 has introduced several significant changes aimed at making housing more affordable and stimulating growth in the real estate sector. One of the most notable changes is the full exemption of land, buildings, and rent from Value Added Tax (VAT). This means that individuals purchasing land or completed buildings will no longer be required to pay VAT on such transactions. Additionally, both residential and commercial rents are now completely free from VAT.

This exemption is expected to lower the overall cost of property transactions and ease the financial burden on Nigerians seeking accommodation. The law also allows contractors to recover VAT paid on construction materials and services, which can reduce construction expenses and make it easier for developers to manage their projects.

Addressing Misinformation

There have been claims circulating online suggesting that the Nigeria Tax Act 2025 introduces a 25 per cent tax on construction funds, bank balances, or business expenses. However, these claims have been dismissed as false and misleading. According to the Chairman of the Presidential Fiscal Policy and Tax Reforms Committee, Taiwo Oyedele, the law does not impose such taxes. He clarified that there is no tax on money kept in bank accounts, no levy on transfers used to buy building materials, and no 25 per cent construction or business cost tax. Additionally, there is no postponement of implementation until 2027, as some messages suggest.

Impact on Developers and Contractors

The Withholding Tax rate on construction contracts has been reduced to two per cent. This lower rate will help developers retain more cash during project execution and reduce their dependence on expensive borrowing. Furthermore, mortgage interest paid by individuals who are building their own homes can now be deducted for tax purposes. This provision is expected to encourage more Nigerians to take steps towards owning their homes.

For landlords, the law allows property owners earning rental income to deduct related expenses such as repairs, insurance, and agency fees before calculating their tax liability. This will reduce the tax burden on property owners and may encourage better maintenance of buildings.

Rent Relief and Stamp Duty Exemptions

The law provides direct rent relief for tenants. Individuals can claim rent relief of up to N500,000, capped at 20 per cent of their annual rent. This measure is intended to increase the disposable income of low-income earners and help ease the pressure of rising accommodation costs. Lease agreements with an annual value below N10 million, or ten times the annual minimum wage, are exempt from stamp duty. This will reduce the cost of formal tenancy agreements, particularly for small businesses and ordinary Nigerians.

Incentives for Investors

Individuals disposing of a dwelling house or an interest in one will no longer pay Capital Gains Tax. This exemption is expected to encourage more investment in residential property. Real Estate Investment Trusts will also enjoy Companies Income Tax exemption if they distribute at least 75 per cent of their dividend or rental income within 12 months after the end of their financial year. This move is expected to attract institutional investors into the housing sector and increase the supply of homes.

Companies involved in manufacturing building materials such as iron, steel, and domestic appliances can qualify for tax exemptions under the economic development incentive scheme for up to 10 years. This will promote local production and reduce dependence on imported materials.

Tax Rate Reductions and Small Business Support

There is also scope for reducing the Companies Income Tax rate for large businesses from 30 per cent to 25 per cent. This move is expected to improve Nigeria’s competitiveness and attract more private sector investment. The new tax framework also protects workers and small businesses. The taxable value of employer-provided accommodation is limited to the annual rental value and capped at 20 per cent of the employee’s annual gross income, excluding the rental value. This ensures that workers are not overtaxed on housing benefits provided by their employers.

Small companies will benefit from zero per cent Companies Income Tax. Such companies will also be exempt from charging VAT and will not have Withholding Tax deducted from their invoices and payments. This will give small contractors and suppliers more room to grow.

Final Thoughts

Oyedele emphasized that the overall goal of the Nigeria Tax Act 2025 is to make housing more affordable, promote real estate development, support local manufacturing of building materials, and grant meaningful rent relief to tenants. He urged Nigerians to remain calm and carefully read the law, stating, “Fact not fear, evidence beats emotion. If anyone makes an alarming claim or tries to misinform you, ask them, ‘Where is it in the law?’” With the new tax laws in place, he added, housing costs should reduce and rent should go down, not up.