Customers to pay less as FG removes VAT on commercial flight tickets

The federal government has exempted commercial flight tickets from value-added tax (VAT).

This is contained in the 2020 finance bill, which was signed into law by President Muhammadu Buhari on December 31, 2020.

The bill exempts “airline transportation tickets issued and sold by commercial airlines registered in Nigeria” and “hire, rental or lease of tractors, ploughs and other agricultural equipment for agricultural purposes” from VAT.

This will make air travel more affordable and subsequently lead to the creation of jobs by the air transport service value chain as well as increase revenues for the government

Value-added tax (VAT) is a consumption tax placed on a product whenever value is added at each stage

A five percent VAT is charged on airline tickets and remitted to the federal government.

The finance law also states that land & building are not taxable goods for VAT purposes. 

This means VAT is not applicable on transfer of land, house rent and purchase, lease of residential /commercial property.

In 2018, Buhari had announced the removal of VAT from domestic air transportation to make it affordable for citizens and create job opportunities in the aviation sector.

“This will make air travel more affordable and subsequently lead to the creation of jobs by the air transport service value chain as well as increase revenues for the government,” the president said at the time.

In a letter read on the floor of the senate and house of representatives on December 1, Buhari had said the 2020 finance bill will prioritise “job creation, economic growth socio-economic development, domestic revenue mobilisation, as well as foster closer coordination with monetary and trade policies”.

The 2020 finance act amends the capital gains act; companies income tax act; industrial development (income tax relief) act; personal income tax act; tertiary trust fund act, customs and excise duties tariff, and value-added tax act to mention a few.