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

The Presidential Fiscal Policy and Tax Reforms Committee has dismissed claims circulating in a viral video that the Nigeria Tax Act 2025 will introduce a 25 per cent tax on building materials, construction funds, or business transactions.

The committee clarified that the Act has already commenced and does not impose any such levy, contrary to assertions that it will only take effect in 2027.

In a statement issued to counter what it described as misinformation capable of causing public anxiety, the committee stressed that the law contains provisions aimed at reducing the cost of housing, encouraging real estate development, and supporting small businesses and low-income earners.

According to the committee, the Act exempts land and buildings from Value Added Tax (VAT), including rent payments. Contractors are also allowed to recover input VAT on materials and services used in construction, a move expected to lower overall building costs.

The withholding tax rate on construction contracts has been reduced to 2 per cent to ease cash flow pressures on developers.

In addition, individuals constructing owner-occupied residential houses can deduct mortgage interest from their taxable income, while property owners earning rental income are permitted to deduct expenses such as repairs, insurance and agency fees.

The Act introduces rent relief of up to ₦500,000 or 20 per cent of annual rent, whichever is lower, to increase disposable income for low and middle-income earners.

Lease agreements valued below ₦10 million annually, or 10 times the annual minimum wage, are also exempt from stamp duty.

Incentives for Investors and Developers

Individuals are exempted from Capital Gains Tax when disposing of a dwelling house. Real Estate Investment Trusts (REITs) are granted Companies Income Tax exemptions where they distribute at least 75 per cent of rental or dividend income within 12 months after the financial year.

The law also provides incentives for manufacturers of building materials such as iron and steel under an economic development incentive scheme that may grant tax exemptions for up to 10 years.

There is also scope for reducing Companies Income Tax for large businesses from 30 per cent to 25 per cent.

Protection for Workers and Small Businesses

Employer-provided accommodation will have its taxable value capped at 20 per cent of an employee’s annual gross income, excluding the rental value.

Small companies benefit from zero per cent Companies Income Tax, exemption from charging VAT, and no withholding tax deductions on invoices and payments.

The committee emphasised that the Nigeria Tax Act 2025 does not:

Tax money in bank accounts

Impose a levy on transfers used to purchase building materials

Introduce a 25 per cent construction or business cost tax.

It urged the public to rely on verified information and consult the law directly when confronted with alarming claims.

According to the committee, the overarching objective of the new tax framework is to make housing more affordable, stimulate real estate investment, and strengthen support for small businesses and tenants, not to introduce additional financial burdens.