Nigeria Tax Reform Committee Clarifies No 25% Levy on Construction or Bank Funds
The Presidential Fiscal Policy and Tax Reforms Committee has dismissed circulating claims of a 25 per cent tax on building materials, construction funds, bank balances, or business expenses as false and misleading. The committee clarified that the Nigeria Tax Act 2025 focuses on reducing housing costs, promoting real estate development, and easing financial pressure on renters and small businesses, not imposing punitive levies.
Contrary to viral misinformation, the committee confirmed that the law does not delay implementation until 2027, nor does it tax bank accounts or payments for construction materials. Instead, key provisions now exempt land and buildings from value-added tax (VAT), allow contractors to recover input VAT where applicable, and reduce withholding tax on construction contracts to just two per cent, making cash flow easier for developers. Mortgage interest on owner-occupied homes has also become tax-deductible.
Renters and property owners are set to benefit significantly. Property owners can deduct expenses such as repairs, insurance, and agency fees, while renters can claim relief of up to N500,000, equivalent to 20% of annual rent, boosting disposable income for low-income households. VAT no longer applies to rent, and lease agreements below N10 million annually are exempt from stamp duty. Individuals are also exempt from capital gains tax when selling a dwelling, and real estate investment trusts enjoy company income tax relief if they distribute 75% of dividends or rental income within a year.
The reforms extend incentives to manufacturers of building materials, including iron, steel, and domestic appliances, while large businesses could see their company income tax reduced from 30% to 25%. Joseph Tegbe, Chairman of the National Tax Policy Implementation Committee, emphasized that the success of these reforms depends on disciplined and consistent execution. He stressed that effective implementation is key to Nigeria’s fiscal stability, especially given the country’s historically low tax-to-GDP ratio and rising public spending pressures.
Tegbe also highlighted that tax reforms must be simple, predictable, and equitable to encourage compliance and strengthen investor confidence. He warned that inconsistent policy enforcement could erode trust and disrupt business planning. He urged a coordinated, whole-of-government approach, integrating digital systems, reliable taxpayer identification, and harmonized oversight between federal and subnational authorities to curb leakages, reduce multiple taxation, and restore confidence in Nigeria’s tax system.
source: The Guardian