Airlines to save N10bn with VAT removed from tickets

The 2020 Finance Act has removed Value Added Tax (VAT) from domestic airline tickets, as airlines may save N10 billion on this.

VAT is remitted to the Federal Inland Revenue Service (FIRS). However, there are concerns that this may not reduce the high airfares that have risen to over N60, 000 for a 30-minute flight.

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Under the umbrella body of the Airline Operators of Nigeria (AON), the domestic airlines in June 2018 took a decision to suspend VAT remittance, insisting aviation is the only means of transportation still burdened by VAT remittance.

However, a week after the resolution, President Muhammadu Buhari issued an Executive Order for the removal of Value Added Tax (VAT) from “All Forms of Shared Transportation”.

The new Act now gives backing to the removal of VAT by the airlines as the N10bn spent on this by AON could be saved.

Although air operators lauded this, they said they would have to contend with other factors like high exchange rate, high cost of aviation fuel (Jet A1), among others that have raised the air tickets.

Chairman of West Link Airlines, Captain Ibrahim Mshelia said it would help to “ease, standardise and harmonise our system with international best practices. It is a good move in the right direction.”

Spokesman for Dana Air, Mr. Kingsley Ezenwa said. “It should reflect soon but don’t forget it is not just VAT that is playing a role in the fares as the multiple taxes are there, forex, parts, JEtA1, etc. But we need to see it implemented then we can start reflecting it on tickets.”

An aviation analyst, Mr. Olumide Ohunayo said, “We expect that airlines should be able to issue tickets stating clearly the fare and what the other charges are; it should not be hidden anymore so we can have some progress in the fare structure.”