What You Need to Know About Paying Taxes on Short-Term Rentals

Short-term rentals have become a lucrative business in Nigeria, especially with platforms like Airbnb, Booking.com, and private rental listings. However, many hosts are unaware of their tax obligations, which can lead to penalties or legal issues.

If you rent out a property or a part of your home for short stays, it is essential to understand how Nigerian tax laws apply to your earnings.

This guide will break down everything you need to know about paying taxes on short-term rentals in Nigeria.

Understanding Short-Term Rental Tax Obligations in Nigeria

In Nigeria, renting out a property for short stays is considered a business activity and is subject to taxation. The main taxes to consider include:

Personal Income Tax (PIT) or Company Income Tax (CIT)
Value Added Tax (VAT)
Hotel and Tourism Taxes (where applicable)
Withholding Tax (WHT) on Rental Income

Short-Term vs. Long-Term Rentals

Short-term rentals: These are properties rented for a few nights or weeks, similar to hotels.
Long-term rentals: These are rentals lasting several months or years and are typically subject to different tax rules.

Personal Income Tax or Company Income Tax

The tax you pay depends on whether you operate as an individual or a business entity.

Personal Income Tax (PIT) for Individual Hosts

If you rent out your property as an individual, your earnings are considered personal income and must be reported under the Pay-As-You-Earn (PAYE) system.
Personal Income Tax rates in Nigeria are progressive, ranging from 7% to 24%, depending on your total annual income.
You must file an annual tax return with the State Internal Revenue Service (SIRS) where the rental property is located.

Company Income Tax (CIT) for Businesses

If you register your short-term rental as a business, you will pay Company Income Tax (CIT) instead of Personal Income Tax.
CIT is 30% for large companies and 20% for small businesses (below ₦100 million in annual turnover).
Businesses must also file tax returns with the Federal Inland Revenue Service (FIRS).

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Value Added Tax (VAT) on Short-Term Rentals

In Nigeria, short-term rentals are subject to Value Added Tax (VAT) at a rate of 7.5%.

How VAT Works for Short-Term Rentals

You must charge 7.5% VAT on each booking and remit it to the FIRS.
If you list your property on Airbnb or other platforms, check if they automatically collect VAT. Otherwise, you are responsible for collecting and remitting it.
VAT payments are due monthly and should be remitted to the FIRS before the 21st of the following month.

If your rental business makes less than ₦25 million annually, you may be exempt from VAT registration, but it’s still advisable to consult with a tax professional.

Hotel and Tourism Taxes

Some states, such as Lagos State, impose additional taxes on short-term accommodations.

Lagos State Hotel Occupancy and Restaurants Consumption Law

Lagos charges a 5% Hotel Occupancy and Consumption Tax on short-term rentals.
Hosts must register their properties with the Lagos State Internal Revenue Service (LIRS) and remit the tax monthly.

Other states may have similar laws, so check with your local State Internal Revenue Service (SIRS).

Withholding Tax (WHT) on Rental Income

Withholding Tax (WHT) applies when a company or corporate client books your short-term rental.

If a company rents your property, they must deduct 10% WHT from the payment and remit it to the FIRS or the relevant SIRS.
If you operate as a registered business, the WHT deducted can be used as a tax credit when filing your Company Income Tax.

Tax Deductions for Short-Term Rental Owners

As a short-term rental owner, you can reduce your taxable income by deducting legitimate expenses, such as:

✅ Property maintenance – Repairs, cleaning, and renovations.
✅ Utilities – Electricity, water, and internet bills.
✅ Advertising and platform fees – Commissions paid to Airbnb or other platforms.
✅ Security and insurance – CCTV, security guards, and property insurance.
✅ Legal and professional fees – Fees paid to accountants or legal consultants.

Keeping detailed records of these expenses will help you reduce your tax liability.

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How to Pay Your Short-Term Rental Taxes in Nigeria

Register for Tax Identification Number (TIN)

Before paying taxes, you must obtain a Tax Identification Number (TIN) from the FIRS or your state’s IRS. This can be done online via the FIRS e-Tax portal or at the nearest tax office.

Filing and Paying Taxes

Income Tax Returns: Due annually by March 31st for companies and April 30th for individuals.
VAT and Hotel Taxes: Must be remitted monthly, before the 21st of the following month.
Withholding Tax (WHT): Deducted at the source and remitted by the payer.

Tax payments can be made online through the Remita platform or directly at designated banks.

Common Tax Mistakes to Avoid

❌ Not registering for tax – All rental income must be reported, even if it’s from Airbnb.
❌ Ignoring VAT obligations – If your rental income exceeds ₦25 million annually, you must collect VAT.
❌ Failing to remit hotel and consumption taxes – Some states require additional taxes.
❌ Not keeping proper records – Always track income, expenses, and tax receipts.
❌ Avoiding tax payments – Tax evasion can lead to fines, audits, or legal action.

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Conclusion

Owning a short-term rental in Nigeria can be profitable, but tax compliance is essential to avoid penalties. Here’s a recap of key takeaways:

✅ Report your rental income – Either under Personal Income Tax or Company Income Tax.
✅ Charge and remit VAT – If applicable, charge 7.5% VAT and remit it to the FIRS.
✅ Check state-specific taxes – Some states impose additional hotel and tourism taxes.
✅ Keep proper records – Maintain records of rental income, expenses, and tax filings.
✅ Pay taxes on time – Avoid penalties by meeting deadlines for tax remittance.

By staying compliant, you can run a successful short-term rental business while avoiding legal troubles. If you’re unsure about any tax requirements, consider consulting a tax expert or accountant.

Would you like a step-by-step tax filing checklist for short-term rentals in Nigeria?

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