Let’s face it — taxes can get tricky fast, especially when we start talking about Capital Gains Tax (CGT). Whether you’re an investor, a property owner, or a businessperson in Nigeria, CGT is something you’ll eventually have to deal with.
And honestly? Most people don’t fully understand it until they’re in the middle of selling an asset and suddenly hear, “You’ll need to pay capital gains tax on that.”
I’ve seen how tax decisions can significantly impact profits and long-term investment outcomes, so in this article, we’ll break down everything you need to know about Capital Gains Tax in Nigeria — in plain, practical English.
What Exactly Is Capital Gains Tax (CGT)?
Simply put, Capital Gains Tax is the tax you pay on the profit you make when you sell an asset — like land, property, shares, or business assets — for more than you bought it.
In Nigeria, CGT is governed by the Capital Gains Tax Act of 1967, which sets out how the tax is assessed, who pays it, and how it’s collected.
So, if you sell a piece of land for ₦8 million that you originally bought for ₦5 million, the ₦3 million profit (minus allowable expenses) is your chargeable gain — and that’s what the tax applies to.
Related: How To Calculate Vat In Nigeria Manually
Key Features of Nigeria’s Capital Gains Tax
Here’s what you need to know before you start calculating anything:
1. Tax Rate
The standard CGT rate in Nigeria is 10% of your net gains — that’s your profit after all allowable deductions.
2. Chargeable Assets
Not every asset attracts CGT, but here are the common ones that do:
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Real estate and land
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Stocks and shares
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Business assets
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Intellectual property (like patents or trademarks)
3. Exemptions
Some transactions are completely exempt from CGT, including:
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Sales of personal effects (like clothing, furniture, or vehicles for personal use)
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Transfers between spouses
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Inheritances or gifts to charitable organizations
4. Compliance Requirement
Before you sell a property or asset, you’re expected to obtain a Capital Gains Tax Clearance Certificate from the Federal Inland Revenue Service (FIRS) — this ensures that all taxes have been properly settled.
How to Calculate Capital Gains Tax in Nigeria
Let’s walk through the process step by step.
Step 1: Determine Your Selling and Purchase Prices
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Purchase Price: The original cost of buying the asset (including related expenses like legal fees or agent commissions).
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Selling Price: The amount you sold the asset for, minus any selling expenses (like advertising or transfer costs).
Step 2: Subtract Allowable Expenses
Allowable expenses are costs that can legally reduce your taxable gain. These may include:
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Renovation or improvement costs
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Professional fees
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Direct selling or acquisition costs
Step 3: Apply the Formula
Chargeable Gain=Selling Price−Purchase Price−Allowable Expenses\text{Chargeable Gain} = \text{Selling Price} – \text{Purchase Price} – \text{Allowable Expenses}
Example of Capital Gains Calculation
Let’s use a quick real-world example.
You bought a property for ₦5 million, spent ₦500,000 on renovations and fees, and later sold it for ₦8 million.
Chargeable Gain=₦8,000,000−₦5,000,000−₦500,000=₦2,500,000\text{Chargeable Gain} = ₦8,000,000 – ₦5,000,000 – ₦500,000 = ₦2,500,000
Since the CGT rate is 10%, the tax owed would be:
₦2,500,000×0.10=₦250,000₦2,500,000 × 0.10 = ₦250,000
So you’ll owe ₦250,000 in Capital Gains Tax on that transaction.
How to File and Pay Capital Gains Tax in Nigeria
Once you’ve calculated your gain, it’s time to file your CGT return with the FIRS. Here’s how:
1. Obtain a Tax Identification Number (TIN)
You need a TIN before you can make any tax payments in Nigeria. It’s your unique ID with the FIRS.
2. Prepare Your Documents
You’ll need to submit:
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A detailed calculation of your capital gains
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Evidence of the purchase and sale (agreements, receipts, etc.)
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Proof of any allowable expenses
3. Submit Your Tax Return
File your return through your local FIRS office or via the FIRS e-filing system.
4. Make Payment
Once your return is assessed, make payment through an approved FIRS payment channel (online or bank).
Important Deadlines
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Tax Year: Runs from January 1 to December 31.
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Filing Deadline: CGT returns must be filed within six months after the end of the tax year.
Missing these deadlines could attract fines and penalties, so it’s best to stay ahead.
Related: New Tax Identification Number Requirements In Nigeria
Consequences of Non-Compliance
Failing to pay or file your CGT on time can lead to serious issues:
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Fines and Penalties: The FIRS may impose additional charges.
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Legal Action: Persistent non-compliance can lead to audits or even property seizure.
Basically — pay your CGT, and pay it on time.
Capital Gains Tax for Non-Residents
If you’re a non-resident (i.e., living outside Nigeria), you’re not off the hook just yet.
Non-residents are only taxed on assets connected to Nigeria, such as:
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Nigerian real estate
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Shares in Nigerian companies
The same 10% rate applies. However, tax treaties between Nigeria and some countries can reduce or modify this rate.
Special Notes on Real Estate Transactions
Real estate is one of the biggest sources of capital gains in Nigeria, and it comes with its own unique considerations:
Primary Residence Exemption
If you’re selling your primary home, you may be exempt from CGT — provided you meet certain conditions, like living in it for a specified period and not selling another home recently.
Investment Properties
If the property is purely for investment, you’ll pay CGT on any profit — but you can deduct valid expenses like renovation costs and agent fees.
Other Taxes to Note
Apart from CGT, real estate transactions can attract Value Added Tax (VAT) and Stamp Duties, depending on the nature of the deal.
Final Thoughts: Making Sense of Capital Gains Tax in Nigeria
Capital Gains Tax might sound intimidating at first, but once you understand how it works, it’s really just about keeping clean records and knowing when a sale counts as a gain.
If you’re selling land, property, or shares in Nigeria, make sure you:
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Track your purchase and sale records carefully.
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Deduct all allowable expenses.
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File your returns on time.
Doing this not only keeps you compliant — it can also help you make smarter financial decisions and avoid losing more money than necessary to taxes.
