Fact Check: Nigeria Tax Act 2025 Targets Housing Relief, Not New Levies

Nigeria Tax Act 2025 Now in Force, No 25% Levy on Building Funds — Committee

THE Nigeria Tax Act 2025 has officially come into force, contrary to circulating claims that the law will only commence in 2027 and impose a 25 per cent tax on construction funds, building materials and bank balances.

The Presidential Fiscal Policy and Tax Reforms Committee issued a clarification dismissing the viral assertions as false and misleading. According to the committee, the law does not introduce any new 25 per cent tax on housing-related transactions, personal savings or business expenses.

Instead, the Act contains several provisions designed to reduce the cost of housing, encourage property development and provide relief for renters and small businesses.

Provisions Targeting Lower Construction Costs

A key component of the new law is its focus on reducing the overall financial burden associated with building and property development.

VAT Exemption on Land, Buildings and Rent

Under Section 185(l), land and buildings are expressly exempted from Value Added Tax (VAT). This exemption extends to rental payments, meaning tenants will not pay VAT on rent.

By eliminating VAT on both property acquisition and rent, the government aims to ease housing costs for individuals and businesses alike.

Input VAT Credits for Contractors

The law also permits contractors to claim input VAT credits on materials, assets and overhead costs where VAT applies. This provision allows construction firms to recover VAT paid on qualifying expenses, effectively lowering total project costs.

Reduced Withholding Tax on Construction Contracts

Construction contracts now attract a reduced Withholding Tax (WHT) rate of two per cent. This adjustment is expected to improve cash flow for developers and reduce financing pressures in the sector.

Mortgage Interest Deduction

Individuals constructing owner-occupied residential homes can deduct mortgage interest from taxable income under Section 30(2)(iv). This relief directly benefits middle-income earners seeking home ownership.

Deductible Rental Expenses

Property owners earning rental income may deduct legitimate business expenses such as repairs, insurance premiums and agency fees, ensuring tax is charged only on net income rather than gross receipts.

Direct Relief for Tenants

The Act introduces targeted support for renters, particularly low-income earners struggling with rising housing costs.

Rent Relief Allowance

Under Section 30(2)(vi), individuals may claim tax relief of up to ₦500,000, representing 20 per cent of annual rent paid. This measure increases disposable income and cushions the financial impact of rent payments.

Stamp Duty Exemption

Lease agreements valued below ₦10 million annually, or 10 times the annual minimum wage, are exempt from stamp duty under Section 134. This provision significantly reduces transaction costs for small and mid-scale tenants.

Incentives for Investors and Developers

Beyond direct housing relief, the Act provides tax incentives aimed at stimulating real estate investment and manufacturing.

Capital Gains Tax Exemption on Dwellings

Individuals disposing of a residential dwelling or interest in one are exempt from Capital Gains Tax (CGT) under Section 51(1), encouraging property transactions and reinvestment.

REIT Incentives

Real Estate Investment Trusts (REITs) that distribute at least 75 per cent of dividend or rental income within 12 months after the financial year-end are exempt from Companies Income Tax under Section 162(c). This measure is intended to deepen the real estate investment market.

Priority Sector Manufacturing Incentives

Manufacturers producing building materials such as iron, steel and domestic appliances may qualify for tax exemptions under the economic development incentive scheme for up to 10 years. The goal is to strengthen local production and reduce dependence on imports.

Reduced Corporate Tax Rate

The law also provides scope for reducing the Companies Income Tax rate for large firms from 30 per cent to 25 per cent, improving Nigeria’s investment competitiveness.

Protection for Workers and Small Businesses

The Act contains safeguards to support employees and small enterprises.

The taxable value of employer-provided accommodation is capped at the annual rental value, subject to a maximum of 20 per cent of an employee’s gross annual income.

Small companies benefit from zero per cent Companies Income Tax, exemption from charging VAT, and relief from withholding tax deductions on their invoices — measures intended to strengthen micro and small enterprises in the construction supply chain.

What the Law Does Not Contain

The committee emphasised that the Act does not:

• Impose taxes on money held in bank accounts.

• Tax transfers used to purchase building materials.

• Introduce a 25 per cent construction levy.

• Postpone implementation until 2027.

“Fact Not Fear”

According to the committee, misinformation surrounding the Act appears designed to generate unnecessary alarm.

Officials urged citizens to rely on verified legal texts rather than viral videos, insisting that the legislation was structured to lower housing costs, stimulate development and protect vulnerable groups.

The message was clear: the new tax framework is aimed at affordability and growth — not new burdens.