The federal government has exempted commercial flight tickets from value-added tax (VAT) effective from 1st of January 2021. This implies that air passengers may no longer pay as much as they were paying for air tickets.
Taiwo Oyedele, West Africa tax leader, PwC Nigeria disclosed on Twitter via his Twitter handle @taiwoyedele that “Effective 1st Jan 2021, commercial flight tickets have been exempted from VAT.
“Next time you fly, cross-check that you’re not wrongly charged VAT and hopefully airfares should come down.”
Effective 1st Jan 2021, commercial flight tickets have been exempted from VAT.
Next time you fly, cross check that you're not wrongly charged VAT (and hopefully air fares should come down). #FinanceAct2020
— Taiwo Oyedele (@taiwoyedele) January 5, 2021
The exemption of commercial flight tickets from VAT which is included in the 2020 finance act, is expected to reduce flight tickets and improve margins for airlines.
Oyedele, who was one of the members that drafted the bill, said that airline operators made aggressive demands for a number of concessions for the airlines.
He also disclosed that the importation of aircraft and spare parts have been exempted from VAT.
He said the bill which has been signed by President Muhammadu Buhari will help bring down prices of air tickets and stimulate demand.
“The biggest challenge the sector has been facing is COVID. People are afraid to travel and maintenance of aircraft is very high. Taxes have been an impediment to an extent. If you take out taxes on some of these components, it will help airlines grow their margins,” Oyedele explained.
VAT is charged as five per cent on every flight ticket sold by airlines and is remitted to the Federal Government.
The Nigerian umbrella body of Airline operators, Airline Operators of Nigeria (AON), had estimated that its members were paying over N10 billion as taxes annually, a situation the group said was threatening their operations.
According to the group, VAT remittance was unfair, as only domestic airlines were made to pay, while foreign airlines were exempted.