The Presidential Fiscal Policy and Tax Reforms Committee has issued a clarification on the Nigeria Tax Act 2025, stating that the law has already commenced and does not impose a 25 percent tax on building materials, construction funds, or bank balances.
The committee said it is aware of a recent video claiming that the new tax laws will commence in 2027 and alleging the imposition of a 25 percent tax on funds for building materials and other transactions. It described both claims as incorrect.
According to the statement, “Contrary to the misinformation seeking to create fear, panic and disaffection, the Nigeria Tax Act 2025 has already commenced and does not impose a 25% tax on construction funds, bank balances, or business expenses.” It added that the Act instead contains provisions designed to reduce the cost of housing, rent and real estate development.
Under key provisions of the Nigeria Tax Act 2025, land and buildings are now specifically exempt from Value Added Tax (VAT) under Section 185(l). The committee explained that this VAT exemption also covers rent, meaning rent is fully exempt from VAT.
Contractors can now recover VAT on their assets and overhead costs where VAT is chargeable on materials or services. This input VAT credit is expected to lower overall construction costs. In addition, a reduced Withholding Tax (WHT) rate of 2 percent applies to construction contracts, helping developers conserve cash flow and reduce financing pressure.
The law also provides a loan interest deduction under Section 30(2)(iv), allowing mortgage interest to be tax-deductible for individuals developing an owner-occupied residential house. Property owners earning rental income can deduct related expenses such as repairs, insurance, and agency fees under Section 20.
For renters and tenants, the Act introduces direct relief. Under Section 30(2)(vi), individuals can claim rent relief of up to ₦500,000, which represents 20 percent of annual rent, to increase disposable income for low-income earners. Lease agreements with an annual value below ₦10,000,000, or 10 times the annual minimum wage, are exempt from stamp duty under Section 134.
The Act also outlines incentives for investors and developers. Under Section 51(1), individuals pay no Capital Gains Tax (CGT) when disposing of a dwelling house or an interest in one. Real Estate Investment Trusts (REITs) are exempt from Companies Income Tax (CIT) under Section 162(c) when they distribute at least 75 percent of dividend or rental income within 12 months after the financial year-end.
Manufacturing of building materials such as iron, steel, and domestic appliances qualifies for specific tax exemption under the economic development incentive scheme for up to 10 years. There is also scope for reducing the Companies Income Tax rate for large businesses from 30 percent to 25 percent under Section 56.
For workers and small businesses, the taxable value of employer-provided accommodation is capped under Section 14(6). It is limited to the annual rental value and subject to a maximum of 20 percent of the employee’s annual gross employment income, excluding the rental value.
Small companies benefit from 0 percent Companies Income Tax, exemption from charging VAT, and no deduction of Withholding Tax from their invoices and payments.
The committee stressed that the Act does not tax money in bank accounts or bank balances, does not tax transfers for buying building materials, does not introduce a 25 percent construction or business cost tax, and does not delay implementation until 2027.
It described claims suggesting a new tax on building materials or bank funds as false and a misrepresentation of the law. The committee stated that the new tax law introduced measures to make housing more affordable, promote real estate development, incentivise manufacturing of building materials, and grant rent reliefs to tenants to enhance their disposable income.
In its final word, the committee said, “Fact Not Fear, evidence beats emotion. If anyone makes an alarming claim or tries to misinform you, ask them ‘Where is it in the law?’” It added, “With the new tax laws, housing should become more affordable and rent should go down NOT up!”
