Capital Gain Tax (CGT) in Nigeria
The Finance Act of 2020, operational since January 1st, 2021, revised the Capital Gains Tax Act, compelling individuals who dispose of chargeable assets to calculate Capital Gains Tax, submit self-assessment returns, and settle the calculated tax.
Thus, this notice is directed to all taxpayers (including companies, partnerships, executors, trustees, communities, families, and individuals), tax professionals, and the general populace, outlining the following:
The Capital Gains Tax Act (CGTA), as amended, obliges individuals disposing of chargeable assets to bi-annually compute Capital Gains Tax, submit self-assessment returns, and remit the tax calculated to the relevant tax authority.
The deadline for filing Capital Gains Tax returns and making payments is either June 30th or December 31st immediately following the asset disposal, whichever comes first.
Hence, any company that has disposed of chargeable assets is mandated to compute Capital Gains Tax, file self-assessment returns, and remit the tax for the following chargeable assets: a. Assets disposed of between January 1st and June 30th must be settled no later than June 30th. b. Assets disposed of between July 1st and December 31st must be settled no later than December 31st. c. Assets disposed of before the enactment of the Finance Act 2020 must be settled no later than June 30th, 2021.
Failure to pay the tax by the due date will incur interest and penalties in accordance with existing tax laws.
• Governed by the Capital Gains Tax Act, Cap C1 LFN 2004 (as amended), Capital Gains Tax is imposed at a fixed rate of 10% on chargeable gains.
• All chargeable assets attract Capital Gains Tax upon disposal at a profit, with exceptions outlined in the Act.
• Chargeable assets encompass all types of property, regardless of their location, whether within or outside Nigeria.
• The deadline for filing returns and settling the tax aligns with that of Companies Income Tax.
• Allowable expenditures for Capital Gains Tax purposes comprise fees, commissions, remunerations for professional services, and transfer costs.
• Exemptions from Capital Gains Tax encompass gains from the sale of valor decorations, life insurance policies, Nigerian government securities, stocks, and shares.
• Gains are not taxable for certain organizations, provided they are not derived from asset disposals related to the organization’s trade activities. Examples include ecclesiastical, charitable, or educational institutions of a public nature, statutory registered friendly societies, cooperative societies under state Cooperative Societies Law, and trade unions registered under the Trade Unions Act.