Why New Tax Law Won’t Push Your Rent Up

Social media users have begun to raise concerns that landlords will hike rents because of a provision in the new tax law.

Their worries bordered on the provision of the 20 per cent relief on annual rent and up to ₦500,000 relief the new tax law provides.

In a Facebook post, a social media user asked the question, “Will Landlords Increase Rent Because of This New Tax?”

New tax reform Acts

In June this year, President Bola Tinubu signed four tax reform bills into law. These are the Nigeria Tax Act, Nigerian Tax Administration Act, Nigeria Revenue Service (Establishment) Act, and Joint Revenue Board (Establishment) Act.

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He appointed, on July 6, 2023, a renowned tax expert, Taiwo Oyedele, to chair the Presidential Fiscal Policy and Tax Reforms Committee.

The new tax laws, which will take effect from January 2026, have made certain provisions for resident and non-resident persons in Nigeria.

Rent relief as provided in the NTA 2025

Section 30(2)(vi) of the Nigeria Tax Act (NTA) 2025 provides that “rent relief of 20% of annual rent paid, subject to a maximum of N500,000, whichever is lower, provided that the individual accurately declares the actual amount of rent paid and other relevant information as may be prescribed by the relevant tax authority.”

Section 31 states further, “Deduction shall not be allowed under this Part to any person for a year of assessment, unless claimed in writing in such form as the relevant tax authority may prescribe.”

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Pinnacle Daily reports that the new NTA 2025 is part of the comprehensive reform of the tax system.

The reforms’ objectives include harmonising tax rules, rationalising tax incentives, and addressing distortions to business growth.

Understanding taxable income and deductions

According to the social media post, many people are apprehensive that the new tax law “will make everything expensive,” the user who gave his name as Iking Ferry stated.

He explained to his followers that landlords will not because they are not going to be taxed on rental income but on their net income or taxable income.

Pinnacle Daily can report that Section 28 of the NTA 2025 states that the total income of an individual for any year of assessment is the taxable income less total deduction.

Ferry explained, for example, that if a landlord collects ₦2 million from rent, his expenses to be deducted could include maintenance costs, repairs, agency fees, security, cleaning, service charges, and the cost of managing the property.

As provided in the Act, expenses are to be deducted from total income earned to arrive at taxable income.

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It should be noted that claims of any expenses to the tax authority must be backed up with evidence, such as payment receipts.

“Most landlords don’t even declare this before, so they were already overcharging tenants without tax.

“So saying ‘tax will make landlords increase rent’ is not accurate,” Ferry added.

How to claim your rent relief

With the new NTA 2025, a tenant will be allowed to deduct up to 20 per cent of their annual rent from their taxable income or up to a maximum of ₦500,000.

For instance, if a tenant pays ₦600,000 yearly rent, he will be refunded ₦120,000 for rent relief if he makes the claim with evidence to the tax authority.

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If a tenant paid an annual rent of ₦3 million, he can only make a claim of ₦500,000, which is the limit the Act provided for as rent relief.

Why landlords increase rent

Ferry pointed out that landlords increase rent because of the location and demand on the property, the cost of maintenance, inflation, and the personal greed of some landlords.

According to the committee chairman, Oyedele, Nigeria has been taxing poverty, as about 98 per cent of workers in the public and private sectors will have their tax decline or a complete removal of their pay-as-you-earn from next year.

What the tax committee is saying

At a forum with journalists in Lagos, he explained that two things determine individual taxable income – statutory deductions and relief.

“Under the new tax laws, whatever you paid as your rent, you get 20% of it as a relief, up to 500,000 naira.

“So, whatever that amount is, take it away from your gross income or salary. The balance is then called taxable income.

“That is what you take to the tax table to apply the first 800,000 Naira as 0% and the next at the rate that is there, and so on,” Oyedele said.