Running a short-let in Lagos? The tax question nobody has settled

What Lagos expects

Lagos’s Hotel Occupancy and Restaurant Consumption Law, passed in 2009, charges 5% on what guests pay for hotel rooms and facilities, event centres, and food and drink in restaurants. Lagos’s tax authorities say it covers short-let apartments too.

The host does not pay the tax out of their own pocket. They act as a collector for the Lagos State Internal Revenue Service (LIRS):

• add 5% to the guest’s bill, calculated before VAT;

• register with LIRS within 30 days of starting operations;

• file a return and pay over what was collected by the 20th of each month.

Late payment attracts a 10% penalty plus interest. LIRS can also seize goods or seal premises to recover unpaid tax without first going to court. If you disagree with an assessment, you have only seven days to object.

Why it is not that simple

Federal law also taxes consumption, through VAT at 7.5%. For years, hotels have argued that they should not pay both on the same bill:

• 2017: In a case involving Eko Hotels, the Supreme Court held that the federal VAT law had “covered the field” of consumption tax, so state consumption tax laws could not operate alongside it while it stood.

• 2019: The Federal High Court in Lagos went the other way. It upheld the Lagos law and stopped federal VAT on hotel and restaurant spending in Lagos.

• 2022: The Court of Appeal set that decision aside and held that VAT takes priority over the Lagos law.

LIRS has continued to demand the consumption tax all the same.

Now the ground has shifted again. On 1 January 2026, the Nigeria Tax Act 2025 repealed the old VAT Act and re-enacted VAT inside a single new tax law. The Supreme Court had said state consumption laws stay inoperable until the VAT Act is repealed or set aside by a court. Lagos may argue that this has now happened. Hotels will answer that VAT still covers the same ground, just in a different statute. As far as we know, no court has yet decided that point.

Our view

Short-let hosts are small businesses caught in a fight between two tax authorities. They should not have to fund that fight. Two things would help:

1. One tax, clearly allocated. The federal and Lagos governments should agree, through the new Joint Revenue Board or by legislation, which tax applies to a short-let stay, so guests are not charged twice.

2. Guidance before enforcement. LIRS should publish clear guidance for short-let hosts, including how hosts who take bookings through online platforms should show the tax, before it reaches for seizure powers.

Until then, hosts need to protect themselves.

What to do now

• Check that you are allowed to run a short-let at all. Several Lagos estates restrict short-lets, and Banana Island banned them in February 2026. If you rent the flat yourself, you need your landlord’s consent to sublet.

• Keep clean records of every booking: dates, guest, amount paid and platform fees.

• Show taxes separately on your invoices, so it is clear what was charged and why.

• Take advice on registration. Whether and how to register with LIRS, and how VAT applies to you, depends on how you are set up and how much you earn. Getting it right early is cheaper than arguing later.

• Never ignore an assessment. The seven-day objection window is short, and seizure can follow.