Nigeria Implements Nigeria Tax Act 2025 and Removes VAT on Land Buildings and Rent to Transform Real Estate Market Across the Country

Nigeria’s real estate and construction sectors are entering a transformative period following the rollout of the Nigeria Tax Act 2025, which fully exempts land, buildings, and rent from Value Added Tax (VAT).

The reform, now officially in force, aims to make housing more affordable, encourage property development, and ease financial strain on tenants, homeowners, and small businesses.

The Presidential Fiscal Policy and Tax Reforms Committee, chaired by Taiwo Oyedele, confirmed that the exemption applies to both the purchase of land and completed buildings, as well as residential and commercial rents.

This means that property buyers no longer pay VAT on acquisitions, and tenants are relieved of VAT charges on their rent payments.

Expected Benefits for Homeowners, Tenants, and MSMEs

Removing VAT from key real estate components is projected to reduce transaction costs and improve affordability, making property investment more attractive.

For micro, small, and medium enterprises (MSMEs), particularly those renting offices, shops, or small warehouses, the reform translates into lower operational costs and enhanced cash flow.

Oyedele also addressed misconceptions circulating online that the law imposes a 25% tax on construction funds, bank balances, or business expenses.

He clarified these claims as false, emphasizing that no new taxes are levied on bank deposits, material purchases, or construction-related spending.

Contrary to rumors of delayed implementation, the reforms are already active and operational.

New Measures Lower Construction Costs and Boost Developer Cash Flow

Beyond VAT exemptions, the Act introduces several incentives for contractors and developers.

Input VAT paid on eligible assets and overheads can now be recovered, easing project cash flow and lowering overall construction costs.

Furthermore, the Withholding Tax rate on construction contracts has been reduced to 2%, allowing developers and MSME contractors to retain more working capital during project execution.

Homeowners also gain from tax-deductible mortgage interest on owner-occupied residential properties, a move aimed at encouraging homeownership.

Landlords can now deduct repair costs, insurance premiums, and agency fees before calculating rental income tax, which could reduce rental pressure and encourage better property upkeep.

Rent Relief and Stamp Duty Exemptions for Tenants

The law provides rent relief of up to ₦500,000, capped at 20% of annual rent, significantly improving disposable income for low- and middle-income earners.

Lease agreements valued below ₦10 million per year—roughly ten times the national minimum wage—are exempt from stamp duty, lowering the cost of formal tenancy for both individuals and small enterprises.

Boosting Investment and Supporting Local Production

The reform also targets investment and domestic production.

Capital Gains Tax has been removed on the sale of residential properties, a move expected to stimulate housing market activity.

Manufacturers of building materials, including iron, steel, and domestic appliances, can now qualify for up to 10 years of tax exemptions under the economic development incentive scheme, strengthening local supply chains and reducing import reliance.

MSMEs are among the largest beneficiaries, with zero percent Companies Income Tax, exemption from VAT collection, and relief from Withholding Tax on invoices and payments.

These measures offer significant breathing room for small businesses involved in construction, real estate services, and building material supply, enabling them to expand and compete more effectively.

What’s Next?

With the new tax framework operational, the real estate and construction sectors are expected to see lower housing costs, reduced rental pressures, and increased affordability for tenants and homeowners.

MSMEs across the value chain may benefit from improved cash flow, enhanced competitiveness, and opportunities to scale operations.

Observers will monitor how these incentives impact property development, housing supply, and investment in local building material production in the coming months.

Summary

The Nigeria Tax Act 2025 introduces comprehensive VAT exemptions on land, buildings, and rent, alongside additional tax relief for developers, landlords, tenants, and MSMEs.

By reducing transaction costs, easing rental burdens, and incentivizing local production, the reform is designed to stimulate housing development and boost real estate investment.

Contrary to rumors, no new taxes are imposed on construction spending or bank balances, and the law is already in effect.

Analysts expect significant shifts in Nigeria’s property and construction landscape as these measures take hold.