Shortlet Tax in the 2025 Act: What a Long Let Never Pays

A long let is a supply of land. A shortlet is a supply of services. Under the Nigeria Tax Act 2025, that one distinction changes which taxes you pay, how often you file, and what you can claim.

Take a three-bedroom flat in Lekki.

Let it for a year at ₦12,000,000 and you have property income. No VAT. No consumption tax. One filing, once a year.

Let the same flat by the night at ₦120,000 and you have a hospitality business. Two additional taxes may apply, one of them monthly, and your annual turnover roughly doubles. That drags you toward thresholds that decide whether you pay 0% or 30% company income tax.

The building did not change. What you are selling did.

On this flat, the shortlet grosses double and nets ₦46,400 more. Collect one tax properly and it nets ₦1,246,400 more. The rest of this guide is why that gap is so small, and what widens it.

Most comparisons between short-term rental and long-term rental stop at gross yield. That is the least interesting number. This guide covers what each model actually costs after tax, where the 2025 law is clear, and where it is genuinely unsettled.

Land, or a service?

Section 186(1)(l) of the Nigeria Tax Act 2025 lists, among exempt supplies:

land or building including interest in land or building

A long let is a grant of an interest in land. Your tenant gets exclusive possession of the property for a term. That is squarely inside the exemption. No VAT on residential rent, and none on commercial rent either. The Act draws no distinction between the two.

A shortlet is harder to place. Your guest never gets an interest in land. They get a licence to occupy for two nights, and what they are actually paying for is bundled: a furnished flat, power that works, linen changed between stays, cleaning, WiFi, security, sometimes an airport pickup. That is the supply of services, priced per night, delivered by a business.

The Act does not say so in terms: section 186 carries no carve-out for hotels, serviced apartments or short-let accommodation. But the exemption attaches to the thing supplied, hotels in Nigeria have charged VAT on accommodation for years without anyone suggesting the land exemption covered them, and treating a shortlet as exempt because it happens to sit inside a residential building is a position you would have to defend.

The working position in this guide: treat shortlet accommodation as taxable once you are outside the small-business exemption below. Put it to your accountant on your specific facts. If they reach a different view, follow theirs. Just don't leave the question unasked.

VAT: the 7.5% question

Long let: settled. You do not charge VAT on rent. You never did on residential, and under the 2025 Act you do not on commercial either.

Shortlet: chargeable, and worth getting right.

Bookings through Airbnb are the exception. Airbnb collects 7.5% VAT on the listing price, including cleaning fees, for stays in Nigeria, and pays it over itself. You have nothing to collect or remit on those bookings, whether or not you are registered. Everything below applies to the bookings you take directly, and to any platform that does not collect it for you.

Before that bites, check whether you are inside the net at all. The Tax Administration Act defines a small business as one with gross turnover of ₦100,000,000 or less and fixed assets not more than ₦250,000,000, professional services excluded. Section 22 exempts a small business from the VAT regime. The exemption is wider than most summaries admit. Section 22(5) describes what a small business may opt out of:

the exemption granted to small businesses under this Part including registration, charging of tax on its taxable supplies and filing of returns

So a small business is not merely relieved of monthly filing. It is outside registration and outside charging VAT altogether, unless it elects in. Electing in is a real option, for the input VAT reason below.

The ₦25,000,000 figure still quoted widely as the VAT registration threshold does not appear in the 2025 Act. Treat it as stale.

VAT is a tax on your guest that you collect. If you should have charged it and did not, the liability does not disappear. It comes out of your margin, because you cannot go back and invoice a guest who checked out in March. You discover it during an audit, priced into a nightly rate you set two years ago.

The offsetting upside is one almost nobody claims: if you are registered, the VAT on what you buy to run the listing — furniture, appliances, the generator, the cleaning contract — becomes recoverable input VAT.

One sharp detail sits in section 98(2), and it catches furnish-outs specifically:

where value added tax is due under this Act but not charged on an asset [...] the relevant expenditure shall not be eligible as a qualifying capital expenditure

Buy your beds, ACs and inverter from a supplier who does not charge VAT, and you cannot claim capital allowances on them. The informal-market discount costs you the write-down. For a shortlet, where the furnish-out is the largest single claimable item, that is expensive.

Lagos consumption tax: the 5% that names you explicitly

The Lagos State Hotel Occupancy and Restaurant Consumption Law imposes 5% on accommodation, and it does not leave shortlets to inference. Short-let apartments are named alongside hotels, guest houses and motels. Collection runs monthly, remitted to the Lagos Internal Revenue Service by the 20th.

Then it gets complicated. Whether Lagos can charge this alongside federal VAT has been in the courts for six years, and in AG Lagos v Eko Hotels the Supreme Court held that the VAT Act covers the field: charging both on the same supply is double taxation. The wider state-versus-federal question is still before the Supreme Court as at September 2026, and enforcement has not waited for it.

So you are exposed to a 5% state tax that names your business, a 7.5% federal tax with the stronger constitutional pedigree, and authority saying you should not pay both. Other states run comparable levies under their own laws, so check your state's position rather than assume the Lagos regime travels.

This is not an area to resolve from a blog post. It is an area to price into your nightly rate and raise with an advisor before an assessment arrives.

Income tax: the shortlet's wider cost base

Because a shortlet is a trade rather than passive property income, the deductible base is considerably wider. Every cost below is incurred to earn the income, and every one is claimable:

Platform commission
Turnover cleaning and linen, per stay
Power — diesel, inverter, Band A tariff
Internet and television subscriptions
Guest consumables and welcome supplies
Co-host or operations staff
Dynamic pricing tools, listing photography
Repairs, maintenance, service charge, security

A long-let landlord deducts almost none of this, for the simple reason that the tenant pays it. There is nothing to deduct because nothing was spent.

Void nights carry cost. Occupied nights carry revenue. Power, internet, security and service charge run at 100% whether the listing is full or empty. A long let at 100% occupancy for twelve months carries none of them.

Capital allowances: where furnishing pays you back

Table I of the First Schedule sets the rates:

Class	Rate	Covers
1	10%	Building expenditure
2	20%	Plant, furniture and fittings, other equipment
3	25%	Motor vehicles, software

This is where a shortlet genuinely wins. A long let is handed over bare or lightly fitted. A shortlet is furnished to hotel standard: generator, inverter, air conditioning, appliances, beds, linen, the lot. A ₦12,000,000 furnish-out written down at 20% is ₦2,400,000 of allowances a year that a bare long let simply does not generate.

Two provisos to respect. Section 98(3) requires allowances to be prorated where an asset is only partly used to generate assessable profits, so the owner who shortlets their own flat for eight months and lives in it for four claims eight months' worth, not twelve. And the section 98(2) VAT condition above still applies.

Structure: the ₦50 million line

Section 56 sets two rates. A small company pays 0%. Any other company pays 30%.

The definition is exact, and both limbs must hold:

"small company" means a company that earns gross turnover of N50,000,000 or less per annum with total fixed assets not exceeding N250,000,000, provided that any business providing professional services shall not be classified as a small company

The ₦100,000,000 figure circulating widely is the wrong Act. The Tax Administration Act uses ₦100M for a "small business" VAT filing relief: a different threshold, a different tax, a different statute. For company income tax, the number is ₦50,000,000. Trust the ₦100M figure at ₦80,000,000 of turnover and you will think you owe nothing. You owe 30% plus the 4% development levy under section 59.

Two consequences fall hardest on shortlet operators:

Turnover crosses ₦50M far faster when you sell nights. The same flat that lets for ₦12,000,000 a year grosses ₦24,000,000 on 200 nights at ₦120,000. Three listings put you at ₦72,000,000 and out of small-company treatment. Three long lets leave you at ₦36,000,000 and inside it.

The fixed-asset test usually breaks first. Three Lekki units at ₦120,000,000 each is ₦360,000,000 of fixed assets, past the ₦250,000,000 ceiling before turnover is anywhere near the limit. Most multi-property investors fail this limb first and never notice, because every article they have read only discusses turnover.

And one that is easy to miss: capital allowances can reduce taxable profit to zero while the development levy still bites, because section 59 imposes it on assessable profits, the figure before capital allowances are deducted.

Withholding tax: why shortlet income arrives gross

A corporate tenant on a long let withholds 10% at source and remits it. That is a prepayment against your final bill, and you need the credit note to claim it.

Guests paying by card through a platform withhold nothing.

So shortlet income lands gross. It feels like more money because it is more money, right up until filing, when nothing has been paid on your behalf. The long-let landlord has been making involuntary instalments all year. The shortlet operator has to make them voluntarily, and most do not.

Side by side

	Long-term let	Shortlet
VAT on the let	Exempt — s.186(1)(l)	Taxable as services, once outside the small-business exemption. Airbnb collects it on Airbnb bookings.
State consumption tax	No	5% in Lagos, named explicitly
Income character	Property income	Trade or business
Withholding tax at source	10% from corporate tenants	None
Deductible operating costs	Narrow — tenant pays most	Wide — you pay everything
Capital allowance base	Minimal	Substantial furnish-out at 20%
Speed to the ₦50M ceiling	Slow	Roughly 2× faster per property
Filing cadence	Annual	Annual, plus monthly if registered

The worked example

One flat, owned outright. Two models. Individual, no other income.

	Long let	Shortlet
Revenue	₦12,000,000	₦24,000,000
Deductible costs	₦2,730,000	₦13,210,000
Taxable income	₦9,270,000	₦10,790,000
Income tax	₦1,458,600	₦1,732,200
Lagos consumption tax (5%)	—	₦1,200,000
Net	₦7,811,400	₦7,857,800

The long let's costs are the usual ones: management, repairs, insurance, Land Use Charge, service charge, professional fees. The shortlet's ₦13,210,000, largest first:

Platform commission — ₦3,600,000
Power — ₦2,400,000
Co-host — ₦1,800,000
Cleaning and linen — ₦1,600,000
Service charge and security — ₦1,200,000
Repairs — ₦1,000,000
Consumables — ₦800,000
Internet — ₦480,000
Insurance and Land Use Charge — ₦330,000

Income tax is at the 2025 bands for individuals. The shortlet stays a small business on both tests, so no VAT.

Twice the revenue and two hundred nights of work, for ₦46,400 more.

Now change one thing. Add the 5% to the nightly rate, where it legally belongs. It is a tax on the guest that you collect, not a tax on you. Net becomes ₦9,057,800, and the shortlet wins by ₦1,246,400.

On this property the decision comes down to one thing: whether you collect the consumption tax.

Figures are illustrative. Rates are current. Your numbers are not these numbers. See how Roofteller does this for you →

What to do with this

Do not choose the model on gross yield. The tax and compliance load differs by more than the yield gap on most properties. Our long-term versus short-term breakdown covers the operating economics in depth; this is the tax layer that sits underneath it.

If you run both, keep them apart. Two tax characters, two filing cadences, two deduction profiles, running through one bank account, is the single most common reason a mixed portfolio cannot be filed accurately at year end.

Price the consumption tax into the rate. It is the guest's tax. Absorbing it silently is the most expensive habit in the worked example above.

Set aside as you go. Nothing is withheld on your behalf in a shortlet. The discipline has to come from you, monthly.

Keeping it straight year-round

Separate accounts per property and per listing. Tag each transaction when it happens, not at filing time. Run a monthly cadence for shortlets, because consumption tax is monthly even though income tax is annual. Keep records for six years. That is the audit window. Our shortlet bookkeeping guide walks through that routine step by step.

FAQ

Do I have to charge VAT on my shortlet?

If you are a small business on both the turnover and fixed-asset tests, no. Section 22 puts you outside registration and charging alike. Once either test breaks, the safer reading is yes: you are supplying accommodation services, not an interest in land, and the section 186 exemption is a poor fit. The Act does not settle it. Take advice before you set next season's rates. Bookings made through Airbnb are different: Airbnb collects and pays the VAT on those stays itself.

I run long lets and shortlets. Do I file separately?

They are different income characters and must be computed separately, even on one return. Keeping the money separate all year is what makes that possible.

I live abroad and run shortlets in Lagos. Who taxes me?

Nigeria. Income from Nigerian property is Nigerian-source regardless of where you live, and the 2025 Act widened residency beyond the 183-day test. A permanent home available to you, or immediate family resident in Nigeria, can make you tax resident on worldwide income. Double taxation agreements protect against paying twice. Get advice on your residency status specifically.

This guide is for informational purposes only and does not constitute tax advice. Tax laws are subject to interpretation and change. Consult a qualified tax professional for advice specific to your situation.