Nigeria removes VAT from airfares, aviation services
About three years after a similar order, the Federal Government has
again suspended the deduction of 7.5 per cent Value Added Tax (VAT) on
airfares and other air transport services.
The latest suspension order, scheduled to take effect on January 1,
2021, is contained in the 2020 finance act recently signed by President
Muhammadu Buhari. A member of the bill drafting committee and West Africa Tax Lead, PwC
Nigeria, Taiwo Oyedele, confirmed the development via a tweet yesterday.
The government had earlier suspended five per cent charges on imported commercial aircraft and spare parts.
The FG in June 2018 issued an executive order on the suspension of VAT
in air transport. The Federal Inland Revenue Service (FIRS) claimed to
be unaware of such a directive, hence it was never implemented.
Airline operators had complained that Nigeria is the only country that
still charges VAT on air transport services. The VAT plus 36 other
charges, according to the airlines, account for at least 40 per cent of
total revenue and N10 billion in taxes yearly, leaving the airlines
heavily indebted and in financial distress or both in most cases.
Chief Executive Officer (CEO) of Med-View Airlines Plc, Muneer Bankole,
said he heard of the then removal but that it was never implemented.
Bankole said: “Since we heard about it, we have started talking to FIRS, but they are still chasing us (to pay VAT).”
He said as good as the intention seems, nothing has really changed to realign Nigerian aviation with global best practices.
“Definitely, you know that commercial operations like airlines have
international connections; you don’t pay VAT anywhere in the world. So,
let us do the right things here. All these charges; VAT and taxes don’t
apply to aviation because they don’t help the airline business. That is
why our airlines are nose-diving and government agencies just sit down
looking.
“They (regulatory agencies) should get out of this colonial approach.
Every government agency should go out, fend to get money, and work as a
real service provider. That is the way to go. When you say you are
committed to paying five per cent to this, four per cent to that, three
per cent to another, and so on, then you are still in the colonial era,”
Bankole said.
Dana Air Media and Communications Manager, Kingsley Ezenwa, said the
airline would be excited to plow back the proceeds of VAT removal to the
business and ticket fares subsidy “but that may not happen soon”.
Ezenwa noted that the expected gains are subject to the actual
implementation of the policy and the review of other multiple charges in
the aviation industry.
