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The new Nigeria Tax Reform Bill was signed into law by President Bola Ahmed Tinubu on June 26, 2025, The tax bill touches every sector of the economy and will definitely have great implications for real estate industry, There tax bill had created opportunities and responsibilities for property owners, investors, developers, and tenants.
For instance; for the first time, all taxes related to real estate transactions, such as rental income, property sales, stamp duties, capital gains, and VAT on construction or leasing, now operate under a single legal framework.
Let’s consider some of the key changes in the new tax law system and their implications on the Real Estate industry:
Rent Relief
The new Act introduces Rent Relief, replacing the previous Consolidated Relief Allowance and Personal Relief for individuals. Taxpayers can now claim 20% of their annual rent paid, capped at ₦500,000, provided they accurately declare rent payments and other information required by the tax authority under the Nigerian Tax Act.
In simple terms, individuals who pay rent for their personal accommodation are allowed to reduce their taxable income by an amount equal to:20% of annual rent paid, or ₦500,000 maximum per year.
For instance, let’s say my annual rent is ₦1,200,000.00 which means; 20% of my annual rent is ₦240,000 and since ₦240,000 is below the ₦500,000 cap then my rent relief will be ₦240,000.00 but if my annual rent is ₦5,000,000.00 of which 20% comes to ₦1,000,000.00 and ₦1,000,000.00 is higher than the ₦500,000 limit, then i can only claim the maximum relief of ₦500,000.00.
What do we need to do?
• To qualify for rent relief, your rent payments must be properly documented with evidence such as receipts, bank transfer records, or a signed tenancy or lease agreement showing the annual rent paid.
• Employees must notify their employer of the rent payments and provide the necessary supporting documents to ensure the rent relief is applied to your tax computation.
• Rent Relief will expose Landlords to Tax on Income: Rental income received by landlord forms part of total taxable income and is subject to tax at the applicable marginal rate. Consequently, higher rental earnings may push you the landlord into a higher tax bracket, resulting in an increased overall tax liability.
Withholding Tax Exemptions from Real Estate Investment Trusts (REITs)
Before this new tax bill, Real Estate Investment Trusts (REITs) and Real Estate Investment Companies (REICs) were not clearly recognized in Nigeria’s tax framework. Their taxation was primarily guided by the Companies Income Tax Act for companies and the Withholding Tax for investors, leading to double taxation as stipulated under Section 9(2)(d), distributions made by a real estate investment company to its shareholders from rental income and dividend income received on behalf of those shareholders shall not be subject to further tax.
So what is the implication?
• When Investors receive those dividends, they are exempt from Withholding Tax. In other words, investors no longer pay tax on income that has already been generated from real estate rental operations.
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Capital Gains on Property Sales are now Fully Regulated
The repealed Capital Gains Tax Act has been absorbed into the new Tax Act (Sections 33–46). Henceforth, profits made on the sale, transfer, or compulsory acquisition of land and buildings are subject to Capital Gains Tax, except in a few exempt cases, such as the sale of personal residence or charitable property. The law also clarifies how gains are calculated, ensuring that taxes are based on actual profit realized, not just the sale price.
So what is the implication?
Developers and Investors in real estate industry must now carefully document acquisition costs, improvements, and sales costs to determine accurate taxable gains. .
Legal Compliance of Stamp Duties:
Sections 131–135 of the Nigerian Tax Law (2025) reaffirm that property sales, leases, and tenancy agreements are chargeable instruments subject to stamp duty. Unstamped property documents are inadmissible as legal evidence, meaning buyers and landlords must ensure all property-related documents are properly stamped before registration.
So what is the implication?
• Sale agreements for land or buildings, lease or tenancy agreements, deeds of assignments, mortgages, and property transfers must be stamped to be legally valid.
• All types of leases, whether residential, commercial, or industrial, now clearly fall under chargeable instruments for stamp duty. Lease agreements with an annual value of less than N10 million are exempt.
• The Act reiterates that unstamped documents are inadmissible as evidence in the court of law.
VAT and Property Transactions
The new law retains Value Added Tax (VAT). However, now, it maintains a guiding principle that VAT applies only to goods and services rendered for consideration, not to the transfer of land or the letting of residential accommodation.
So what is the implication?
• The rent or sale of residential properties is exempted from VAT.
• VAT still applies to commercial properties, such as offices, shops, warehouses, malls, and short-term apartments, when operated as a business. For these, landlords or developers must charge VAT at 7.5% on rent, lease, or sale proceeds.
• VAT also applies to construction, renovation, and development services, because these are classified as “services” under the Act. Developers and construction firms must charge 7.5% VAT on: building and renovation contracts, project management or engineering services, and interior fit-outs and finishing works.
• The new Act also keeps VAT on real estate professional services, including: Agency commissions, property valuation fees, legal conveyancing charges, facility management fees, all VAT-able at 7.5%.
• The sale of bare land and land titles has been explicitly exempted from tax. If you sell an undeveloped plot or farmland, no VAT is payable.
Mortgage and Housing Finance Incentives
Under Section 30(2)(a)(iv) of the Act, interest on loans for developing an owner-occupied residential house shall be deductible from the individual’s taxable income. By allowing mortgage interest deductions, the government is rewarding Nigerians who buy or build their own homes using formal loans.
In conclusion; when compare the new tax bill to the repealed tax bill; one will agree that the Nigeria Tax Act 2025 marks a new era of taxation in real estate industry and simplifies taxation which will accomplish the followings:
• Eliminates double taxation,
• Encourages home ownership through mortgage incentives
• Improve rental documentation,
• Strengthens compliance in property transactions.
• Improve revenue generation
ESV. Mike Ibiwoye is the Managing Partner of Mike Ibiwoye & Co- Chartered Estate Surveyors & Valuers.
