What You Need to Know About Short-Term Rental Regulations in Nigeria

Short-term rentals have gained significant traction in Nigeria, with platforms like Airbnb and other local alternatives making it easier for property owners to rent out their spaces to travellers.

With the growing demand for affordable and flexible accommodations, many homeowners and investors have ventured into the short-term rental business.

However, running a short-term rental is not as straightforward as simply listing a property online.

There are several legal and regulatory requirements that hosts must adhere to to operate within the law.

Understanding these regulations is essential for avoiding penalties and ensuring a smooth rental experience for both hosts and guests.

1. Legal Requirements for Operating a Short-Term Rental in Nigeria

Before listing a property for short-term rental, it is crucial to comply with the legal requirements set by Nigerian authorities. Below are the primary legal obligations:

Business Registration Requirements

Individuals renting out their homes occasionally may not need a business registration. However, if the rental is being operated as a business, registration with the Corporate Affairs Commission (CAC) is advisable.
Business registration options include Business Name Registration for small-scale rentals and Company Registration (LLC) for larger operations.

Local Government Permits and Approvals

Some local governments in Nigeria require permits or licensing before a property can be used for short-term rental purposes.
In cities like Lagos and Abuja, specific residential zones may have restrictions on commercial rental activities, requiring approval from the appropriate regulatory bodies.

Zoning Laws and Residential Restrictions

Some estates and residential communities prohibit short-term rentals, particularly in gated neighborhoods.
Property owners should consult their estate management or landlord association to confirm if short-term rentals are permitted within their area.

2. Taxation and Financial Obligations

Operating a short-term rental in Nigeria comes with tax responsibilities. Property owners must comply with federal, state, and local tax laws to avoid legal repercussions.

Value Added Tax (VAT)

The Federal Inland Revenue Service (FIRS) requires businesses providing accommodation services to charge 7.5% VAT on their earnings.
VAT must be remitted monthly, and non-compliance can attract penalties.

Personal Income Tax or Company Tax

If the property is rented out by an individual, the rental income is subject to Personal Income Tax (PIT).
If the property is managed under a registered business, Company Income Tax (CIT) applies, which is currently 30% for large businesses and 20% for small businesses.

Withholding Tax (WHT) on Rental Income

If a tenant (guest) is a corporate entity, they are required to withhold 10% of the rental amount and remit it to FIRS on behalf of the property owner.

Other Levies and Charges

Some states impose additional hospitality and tourism levies for rental accommodations.
Local governments may also require hosts to pay annual tenement rates.

3. Safety and Health Regulations

Ensuring that a short-term rental property is safe and meets health standards is critical for both compliance and guest satisfaction.

Fire Safety Compliance

Properties should have functional fire extinguishers, smoke detectors, and emergency exit signs.
In some states, rental properties must be inspected by fire safety officials before being listed.

Security Measures

Properties must comply with estate or neighbourhood security rules, including registering guests with the estate’s management.
Security measures such as CCTV cameras in public areas, secure locks, and 24/7 security personnel are advisable.

Health and Sanitation Standards

Rental units should meet basic health standards, such as proper waste disposal and clean water supply.
Regular sanitation and fumigation may be required, especially in areas prone to pest infestations.

4. Guest Registration and Data Protection

To maintain security and comply with regulatory policies, short-term rental operators must handle guest information responsibly.

Required Guest Identification and Record-Keeping

Some states and local governments require short-term rental hosts to collect valid identification (passport, driver’s license, or national ID) from guests.
Records of guest stays should be kept in compliance with security agency requirements.

Compliance with Data Protection Laws

With Nigeria’s Data Protection Regulation (NDPR) in place, hosts must ensure they do not misuse guest information.
Sensitive guest data (such as credit card details) should be securely stored and not shared with third parties.

5. State and Local Government Variations

Nigeria’s regulations on short-term rentals vary by location. Here are some key regional considerations:

Lagos State

The Lagos State Government has proposed regulating short-term rentals to protect residential areas from commercial disruptions.
Certain estates prohibit Airbnb-style rentals, requiring hosts to seek approval from estate associations.

Abuja

In some parts of the Federal Capital Territory (FCT), short-term rentals are subject to local hospitality levies.
Estates in high-profile locations may require additional documentation for short-term stays.

Other Cities

Regulations in smaller cities may be less stringent, but local government councils may still impose levies on short-term rental operators.

6. Impact of Regulations on Short-Term Rental Business

Regulatory requirements can impact the profitability and ease of running a short-term rental business in Nigeria.

How Compliance Affects Business Operations

Registering a business and obtaining the necessary permits ensures smooth operations and prevents legal troubles.
Fulfilling tax obligations helps hosts avoid penalties and fines.

Consequences of Non-Compliance

Failure to comply with local zoning laws can lead to eviction from an estate or fines from regulatory bodies.
Tax evasion or failure to register the business can result in legal action from FIRS or the local government.

7. Best Practices for Short-Term Rental Hosts

To run a successful and legally compliant short-term rental business in Nigeria, here are some best practices:

Ensuring Legal Compliance While Maximizing Profits

Understand and follow all relevant legal and tax obligations.
Price rentals competitively while factoring in tax payments and levies.

Hiring Legal or Tax Professionals

Engage a lawyer or tax consultant to navigate business registration and taxation complexities.
Stay updated on regulatory changes to avoid unexpected legal issues.

Using Proper Contracts and Agreements with Guests

Draft a rental agreement outlining the terms of the stay, including security deposits and house rules.
Ensure that guests acknowledge these agreements before booking.

Conclusion

Short-term rentals in Nigeria offer great profit potential, but hosts must navigate legal and regulatory frameworks to operate successfully. Key takeaways include:

Ensuring business registration and compliance with zoning laws.
Meeting tax obligations such as VAT, withholding tax, and personal/corporate income tax.
Adhering to safety, health, and security regulations.
Understanding regional variations in short-term rental laws.
Keeping guest records secure and complying with data protection regulations.

By following these guidelines and best practices, hosts can run a successful short-term rental business while avoiding legal risks.

Staying informed about regulatory updates and consulting professionals when necessary will help ensure long-term sustainability in this growing industry.