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Nigeria Tax Act 2025 Real Estate: How the New Law Impacts Rent Relief, VAT, and Property Investment.

By Ajayi Lucky
Estimated Reading Time: 2 minutes

Before We Begin: Quick Overview

Overview of the Nigeria Tax Reform Bill

Nigeria Tax Act 2025 Real Estate, is signed into law on June 26, 2025 and effective from January 1, 2026, represents one of the most significant updates to the country’s tax system in recent years. It affects every sector, but the real estate and construction industries will feel its impact the most. www.pwc.com

Nigeria Tax Act 2025 Real Estate, For the first time, taxes that relate to real estate transactions are consolidated into a single legal framework. This includes rental income, property sales, capital gains, stamp duties, leasing transactions, and VAT rules. The goal is to simplify processes, eliminate overlaps, and create a more transparent structure that encourages investment and home ownership.

Understanding Rent Relief

The new Act replaces the old Consolidated Relief Allowance with Rent Relief. Nigerians who pay rent for personal accommodation can now reduce their taxable income by:

• 20 percent of their annual rent, or
• A maximum of 500,000 naira

Whichever is lower.

Example

• If your annual rent is 1,000,000 naira, 20 percent gives you 200,000 naira. You can claim the full 200,000 naira.
• If your annual rent is 4,000,000 naira, 20 percent gives you 800,000 naira. Because the relief is capped, you can only claim 500,000 naira.

So What

• You must provide proper documentation such as receipts, transfer records, and a valid lease agreement.
• PAYE employees have to notify their employer and submit evidence so the relief can be applied.
• Landlords become more visible to tax authorities since documented rent payments show rental income that must be taxed.

REITs and Withholding Tax Exemptions

Real Estate Investment Trusts and Real Estate Investment Companies now enjoy clearer tax treatment. Under the new Act, when a real estate investment company distributes rental or dividend income to investors, the investors do not pay withholding tax on those distributions.

So What

• Investors avoid double taxation because income earned through real estate operations is not taxed again when shared as dividends.
• The reform encourages more participation in Nigeria’s REIT market and promotes formal investment structures.

Capital Gains on Property Sales

The previous Capital Gains Tax Act has been absorbed into the new tax framework. Profit earned from selling or transferring land and buildings now attracts capital gains tax. However, some transactions are exempt, such as the sale of a personal residence or properties owned by charitable organizations.

The law provides clearer rules on how to calculate gains, allowing taxpayers to deduct acquisition costs, improvement expenses, and selling costs.

So What

• Developers and investors must keep accurate documentation of all project costs.
• The government now has better tools to track and collect revenue from real estate transactions.

Stamp Duties and Lease Compliance

Sections 131 to 135 emphasize that property sales, assignments, leases, mortgages, and tenancy agreements must be stamped to be legally valid. Unstamped documents cannot be used as evidence in court or during property registration.

So What

• Every property buyer, seller, tenant, or developer must ensure documents are stamped before completing transactions.
• All leases qualify for stamp duty, but residential leases with an annual value below ten million naira are exempt.
• Lawyers, agents, and property managers must follow strict compliance or risk legal issues during disputes.

VAT Rules for Property Transactions

The new tax law maintains VAT but provides clearer guidelines to avoid confusion.

Key VAT Rules

• Rent or sale of residential properties is exempt.
• VAT applies to commercial properties such as malls, warehouses, shops, office spaces, and serviced short let apartments.
• Construction and renovation services attract VAT because they are classified as services.
• Professional real estate services such as agency commissions, valuation fees, facility management, and conveyancing charges attract 7.5 percent VAT.
• Sale of bare land or farmland remains VAT exempt.

So What

Developers and landlords must charge VAT where applicable and correctly categorize their properties to avoid penalties.

Mortgage and Housing Finance Incentives

Section 30 provides an important incentive for home ownership. Individuals who take loans to build or buy their own residential house can deduct the interest on those loans from their taxable income.

So What

• Nigerians using formal mortgage systems enjoy tax relief.
• This promotes long term home ownership and strengthens the formal credit market.

Overall Impact on Real Estate

The Nigeria Tax Act 2025 introduces a more coordinated tax structure that real estate participants can navigate with greater clarity. The reforms:

• Reduce double taxation
• Encourage home ownership
• Improve investor confidence
• Strengthen documentation culture
• Increase government revenue from property transactions

In the long run, the Act creates a healthier and more transparent property market that benefits owners, investors, developers, and tenants.

We love your feedback! Let us know what you think about the Nigeria Tax Act by emailing www.tabansiconsulting.net
If you have research requirements or are considering investing in Nigeria’s property market, contact our team at www.tabansiconsulting.net.