The Presidential Fiscal Policy and Tax Reforms Committee has confirmed that land, buildings, and rent are now fully exempt from Value Added Tax (VAT) under the Nigeria Tax Act 2025.
According to Taiwo Oyedele, the committee chairman, the law is already in effect and aims to reduce housing costs, encourage investment in real estate, and provide relief to tenants and small businesses nationwide. Individuals purchasing land or completed buildings will no longer pay VAT, and both residential and commercial rents are also VAT-free.
Oyedele explained that the removal of VAT on property and rent is expected to lower the cost of property transactions, easing the financial burden on Nigerians seeking accommodation. Contractors can also recover VAT paid on certain construction materials and services, helping reduce building expenses and supporting developers in managing projects.
He dismissed rumors that the new law imposes a 25 per cent tax on construction funds, bank balances, or business expenses, calling them false and misleading. The law does not tax money in bank accounts, transfers for building materials, or impose any high levies on businesses. Implementation is ongoing, contrary to claims that it has been postponed until 2027.
The law has also reduced the Withholding Tax on construction contracts to 2 per cent, allowing developers to retain more funds during projects. Mortgage interest on self-built homes is now tax-deductible, encouraging more Nigerians to own their residences. Landlords can deduct expenses like repairs, insurance, and agency fees from rental income, reducing their tax burden.
Tenants are set to benefit directly, with rent relief of up to N500,000 or 20 per cent of annual rent. Lease agreements under N10 million in annual value are exempt from stamp duty, lowering costs for small businesses and ordinary citizens.
Investors in residential property will no longer pay Capital Gains Tax on sales of dwelling houses or interests in them. Real Estate Investment Trusts that distribute at least 75 per cent of their rental or dividend income within 12 months are exempt from Companies Income Tax, attracting institutional investment into the housing sector.
Manufacturers of building materials like iron, steel, and domestic appliances can qualify for up to 10 years of tax exemption under economic development incentives, promoting local production. Large businesses may also see their Companies Income Tax reduced from 30 per cent to 25 per cent, enhancing Nigeria’s competitiveness.
For employees, taxable employer-provided accommodation is capped at 20 per cent of annual gross income, ensuring fair taxation. Small companies benefit from zero Companies Income Tax, no VAT obligations, and no Withholding Tax on payments, giving them room to grow.
Oyedele emphasized that the Nigeria Tax Act 2025 is focused on making housing affordable, supporting real estate development, promoting local building material production, and providing meaningful rent relief. He urged Nigerians to rely on the law itself rather than fear-mongering claims, stating, “Fact not fear, evidence beats emotion.”
With these measures, housing costs and rent are expected to decrease, benefiting tenants, homeowners, developers, and small businesses across the country.
