FG denies imposing 25% tax on building materials

The Nigeria Tax Act 2025 has formally commenced and does not impose a 25 per cent tax on building materials, construction funds or bank balances, the Presidential Fiscal Policy and Tax Reforms Committee has said.

In a statement addressing what it described as misinformation circulating in a recent video, the committee dismissed claims that the new tax laws would only take effect in 2027 and would introduce sweeping new levies on construction-related transactions.

“We are aware of a recent video claiming that the new tax laws will commence in 2027 and alleging the imposition of a 25% tax on funds for building materials and other transactions,” the committee said.

It stressed that “both claims are incorrect”, adding that “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.”

Rather than introducing new burdens, the committee said the Act “contains provisions specifically designed to reduce the cost of housing, rent and real estate development”.

Housing and construction reliefs

Highlighting key provisions, the committee said land and buildings are now exempt from Value Added Tax under Section 185(l), noting: “Land and buildings are now specifically exempt from Value Added Tax (VAT).”

It added that contractors can now recover VAT on assets and overhead costs where VAT is chargeable on materials or services, explaining that this “lowers overall construction costs”.

The statement further disclosed that a reduced 2 per cent Withholding Tax rate now applies to construction contracts, “helping to conserve cash flow and reduce financing pressure on developers”.

On mortgage financing, it said: “Mortgage interest is tax-deductible for individuals developing an owner-occupied residential house.”

Property owners earning rental income can also deduct expenses such as repairs, insurance and agency fees.

Direct relief for renters

The committee said the Act provides “direct relief for renters and tenants”, including rent relief of up to ₦500,000, representing 20 per cent of annual rent.

“Individuals can claim relief up to ₦500,000 (20% of annual rent), increasing disposable income for low-income earners,” it stated.

It added that rent is fully exempt from VAT and that lease agreements valued below ₦10 million per annum, or 10 times the annual minimum wage, are exempt from stamp duty.

Incentives for investors

The statement also outlined incentives for investors and developers, including Capital Gains Tax exemption on the disposal of a dwelling house.

“Individuals pay no Capital Gains Tax (CGT) when disposing of a dwelling house or an interest in one,” it said.

Real Estate Investment Trusts are also exempt from Companies Income Tax where they distribute at least 75 per cent of dividend or rental income within 12 months of the financial year-end.

In addition, manufacturers of building materials such as iron, steel and domestic appliances may qualify for tax exemptions of up to 10 years under the economic development incentive scheme.

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

The committee said the Act caps the taxable value of employer-provided accommodation at a maximum of 20 per cent of an employee’s annual gross employment income, excluding rental value.

It added that qualifying small companies benefit from 0 per cent Companies Income Tax, exemption from charging VAT and no deduction of Withholding Tax from invoices and payments.

What the law does not do

The committee was emphatic about what the Act does not contain.

“The Act does not tax money in bank accounts or bank balances,” it said.

It also “does not tax transfers for buying building materials”, “does not introduce a 25% construction or business cost tax” and does not “delay implementation until 2027”.

Describing claims of a new tax on building materials or bank funds as false, the committee said such assertions “misrepresent the law”.

In a strongly worded conclusion, it urged Nigerians to rely on evidence rather than speculation.

“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!”