President Bola Tinubu has told Nigerians that house rents in Nigeria will no longer attract the value added tax (VAT). This is a relief for property developers who have borne much of the VAT burden for years.
The president, who spoke recently in a nationwide broadcast to mark the second anniversary of his administration, hoped that removing VAT on rent would eliminate the burden of multiple taxation and make it easier for small businesses to grow and join the formal economy.
Tinubu’s tax incentive is part of the administration’s reforms which have just been approved and passed by the National Assembly. His zero tax on rent announcement simply corroborates the tax reform which promises to help significantly in easing rent burdens on both individuals and institutions in the real estate sector.
“With certain limitations, dividends and rental income received by a real estate investment company on behalf of its shareholders are tax exempt as long as, at least, 75 percent of the income is disbursed within a year following the end of the fiscal year in which it was earned,” the reform says.
Taiwo Oyedele, chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, explained that the reform is designed to remove excessive tax burdens across the housing and construction value chain, from materials and construction to property sales and rentals.
“These reforms are about making life easier for Nigerians. They’ll reduce tax pressures whether you are buying, building, or renting. The goal is to stimulate economic activities in construction and, by extension, the broader economy,” he revealed.
According to him, the reform includes incentives for the production and supply of building materials, which are expected to lower market prices over time. “When you provide tax benefits to producers, it means outputs will be cheaper,” he said.
Expert weigh in
Tonye Ezekiel, a property market analyst, told BusinessDay last Thursday that landlords, developers and tenants will benefit from the zero percent VAT, explaining that in case of dividends and rental income received by a real estate investment company on behalf of its shareholders, a lot of money will be left in the pockets of all parties to the transaction.
Ezekiel noted that there has been concerns about the double taxation faced by Real Estate Investment Trusts (REITs), arguing that this double taxation has been hindering the growth and investment attractiveness of REITs, which are crucial for funding real estate projects.
He disclosed that the reform has raised the exemption threshold for corporate income tax from N25 million to N50 million in annual turnover. A four percent development levy will be implemented to finance educational and infrastructural projects. If implemented, as intended, this will help to address the supply imbalances in Nigeria’s real estate market.
It is on the strength of all these that Tinubu assured Nigerians that the zero rent guaranteed by the tax reforms will protect low-income households and support workers by expanding their disposable income, meaning that renters will now have more money and more access to homes.
“Rent, public transportation, and renewable energy will be fully exempted from VAT to reduce household costs further. We are ending the era of wasteful and opaque tax waivers. Instead, we have introduced targeted and transparent incentives supporting high-impact manufacturing, technology, and agriculture sectors. These reforms are not just about revenue, but also about stimulating inclusive economic growth,” the president said.
To promote fairness and accountability, Tinubu assured that the government is establishing a tax ombudsman, an independent institution that will protect vulnerable taxpayers and ensure the system works for everyone, especially small businesses.
Ezekiel hopes that, if the tax reform is fully implemented to the letter, the exemption of building and construction materials would drag down construction cost significantly and that would impact positively on house prices and rents that landlords and developers would demand from renters. (BusinessDay)
