You Just Sold That Land — But Did You Account for the Tax?
Imagine this: Tunde inherited a plot of land in Ibadan years ago. He finally sells it for ₦18 million and is thrilled with the profit. He spends some of the money, invests the rest — and then, several months later, he receives a letter from the Oyo State Internal Revenue Service asking him to explain why he hasn't filed a Capital Gains Tax return.
Tunde had no idea that selling land could trigger a tax obligation. He's not alone. Thousands of Nigerians sell property, shares, or other valuable assets every year without realising that a specific tax — Capital Gains Tax (CGT) — may apply to the profit they made.
The good news? CGT in Nigeria is straightforward once you understand the basics. The rate is flat, there are genuine exemptions that could reduce or even eliminate your bill, and compliance is entirely manageable. This guide will walk you through everything you need to know — from what CGT actually is, to how to calculate it, to exactly what to do next.
What Exactly Is Capital Gains Tax?
Capital Gains Tax (CGT) is a tax on the profit you make when you sell or transfer a valuable asset. It is NOT a tax on the full selling price — only on the gain, meaning the difference between what you paid for the asset and what you received when you sold it.
CGT in Nigeria is governed by the Capital Gains Tax Act (CGTA), which has been in place since 1967 and has been updated by several Finance Acts, including amendments in 2021 and 2023.
Here is the most important thing to understand: CGT is a separate tax from your regular income tax. Your salary, business profits, and rental income are taxed under the Personal Income Tax Act (PITA) or Companies Income Tax Act (CITA). But when you sell an asset like land, shares, or machinery that you held as an investment, that profit is taxed under the CGTA — at a flat rate of 10%.
That 10% flat rate is one of the lowest Capital Gains Tax rates in Africa, which makes Nigeria relatively investor-friendly. But you still have to pay it — and you have to report it yourself.
Which Assets Are Subject to CGT? (Chargeable Assets)
The law calls taxable assets "chargeable assets." Under Section 2 of the CGTA, almost all forms of property qualify, including:
• Land and buildings — plots, residential property, commercial property, farmland • Shares and securities — stocks listed on the Nigerian Exchange Group (NGX) and unlisted company shares • Business assets — machinery, equipment, goodwill (when sold as a capital item, not as trading stock) • Intellectual property — patents, trademarks, and similar rights • Foreign currency — gains made on holding and disposing of currencies other than the Nigerian Naira • Cryptocurrency and digital assets — explicitly included under the Finance Act 2023 • Options and debts — certain financial instruments
In plain terms: if you owned something valuable, it went up in price, and you sold it — CGT likely applies to your profit.
What Is NOT a Chargeable Asset?
Some assets are specifically exempt from CGT under the CGTA. These include:
• Nigerian government securities — Federal Government Bonds, Treasury Bills, and similar instruments (Section 27 of CGTA). Gains on these are completely exempt. • Your principal private residence — the home you actually live in as your main residence qualifies for full exemption under Section 26 (more on this below). • Life insurance policy payouts — gains on policies paid out on death or policy maturity are exempt under Section 28. • Gains by charities, religious bodies, and educational institutions — when proceeds are used for their stated purposes (Section 30).
Capital Gains Tax vs. Regular Income Tax — What Is the Difference?
This is where many people get confused, so let's clear it up with a simple rule:
If selling assets is your BUSINESS, you pay income tax. If you sold an asset you were HOLDING as an investment, you pay CGT.
Think of it this way:
• A property developer who regularly buys land, builds houses, and sells them is running a business. Their profits are ordinary business income taxed under PITA (up to 24%) or CITA (30%) — not CGT. • A private individual who bought land 10 years ago as an investment and now decides to sell it is making a capital disposal. That profit is taxed under CGT at 10%.
The determining factor is your intent and the nature of your activity — not just the type of asset. This distinction matters enormously because income tax rates can be up to 24–30%, while CGT is only 10%.
What Is the CGT Rate in Nigeria?
CGT in Nigeria is charged at a single flat rate of 10% on your net chargeable gain. This rate applies to:
• All individuals (Nigerian residents selling assets) • All companies (on capital assets that are not trading stock) • Shares and securities — confirmed at 10% under the Finance Act 2021 • Cryptocurrency and digital assets — confirmed at 10% under the Finance Act 2023
There is one small annual exemption for individuals: the first ₦10,000 of capital gains in a tax year is exempt from CGT. In reality, given today's asset values, this is a very minor relief — but it applies and should be deducted in your calculation.
Note: Companies do NOT get the ₦10,000 annual exemption.
How to Calculate Your Capital Gains Tax
Calculating CGT is simpler than most people expect. Here is the four-step process:
Step 1: Calculate your Allowable Cost This is the total of everything you spent to acquire and improve the asset: • Original purchase price • Legal fees and agent commissions paid when buying • Cost of improvements or upgrades (not regular maintenance or repairs)
Step 2: Calculate your Net Proceeds This is what you actually received from the sale, minus the costs of selling: • Selling price received • Minus: agent fees, legal fees, and other direct selling costs
Step 3: Compute the Chargeable Gain Subtract your Allowable Cost from your Net Proceeds. Then deduct the ₦10,000 annual exemption (individuals only).
Step 4: Apply the 10% Rate Multiply your net chargeable gain by 10% to get your CGT bill.
Let's see this in action with real examples.
Real-World Examples
Example 1: Adeyemi Sells a Plot of Land in Lekki
Adeyemi bought a plot of land in Lekki, Lagos in 2015 for ₦8,000,000. He paid ₦500,000 in legal and agent fees when buying. He spent ₦2,000,000 on capital improvements (survey and fencing). In 2024, he sold the land for ₦25,000,000 and paid ₦400,000 in agent fees on the sale. This is NOT his home — it was a pure investment.
Step 1 — Allowable Cost: • Purchase price: ₦8,000,000 • Buying fees: ₦500,000 • Capital improvements: ₦2,000,000 • Total Allowable Cost: ₦10,500,000
Step 2 — Net Proceeds: • Sale price: ₦25,000,000 • Less selling costs: –₦400,000 • Net Proceeds: ₦24,600,000
Step 3 — Chargeable Gain: • Net Proceeds: ₦24,600,000 • Less Allowable Cost: –₦10,500,000 • Gross Gain: ₦14,100,000 • Less Annual Exemption: –₦10,000 • Net Chargeable Gain: ₦14,090,000
Step 4 — CGT Payable: • 10% × ₦14,090,000 = ₦1,409,000
Adeyemi must file his return with the Lagos State Internal Revenue Service (LIRS) by 31 March 2025 and pay ₦1,409,000 at the same time.
Example 2: Fatima Sells Her Shares in a Listed Nigerian Company
Fatima bought 50,000 shares in a major listed Nigerian company in 2019 at ₦150 per share, spending a total of ₦7,500,000. She paid ₦75,000 in stockbroker commissions on purchase. In 2024, she sold all 50,000 shares at ₦380 each (total ₦19,000,000) and paid ₦190,000 in broker commissions on the sale.
Step 1 — Allowable Cost: • Purchase price: ₦7,500,000 • Buying commission: ₦75,000 • Total Allowable Cost: ₦7,575,000
Step 2 — Net Proceeds: • Sale proceeds: ₦19,000,000 • Less selling commission: –₦190,000 • Net Proceeds: ₦18,810,000
Step 3 — Chargeable Gain: • Net Proceeds: ₦18,810,000 • Less Allowable Cost: –₦7,575,000 • Gross Gain: ₦11,235,000 • Less Annual Exemption: –₦10,000 • Net Chargeable Gain: ₦11,225,000
Step 4 — CGT Payable: • 10% × ₦11,225,000 = ₦1,122,500
Fatima files her return with her State Internal Revenue Service by 31 March 2025. Important: the dividends she received separately on those shares are taxed under income tax rules — this calculation only covers the gain she made on selling the shares.
Example 3: The Bello Family Sells Their Family Home — And Pays Zero CGT
Mr. and Mrs. Bello bought their family home in Abuja in 2010 for ₦15,000,000. They have lived in it continuously as their only home. In 2024, they sell it for ₦60,000,000 — a gain of ₦45,000,000.
Because this is their principal private residence — the home they actually live in — Section 26 of the CGTA grants them a full exemption. They do not owe any CGT on this sale, regardless of how large the gain is.
• Gross Gain: ₦45,000,000 • Less Principal Private Residence (PPR) Exemption: Full exemption applies • CGT Payable: ₦0
However, if the Bellos also owned a separate investment property, only their actual family home qualifies for PPR. The investment property would be fully taxable. They should also notify the FCTA IRS of the property disposal within 30 days — even when exempt.
Key Exemptions You Should Know About
Beyond the PPR exemption, here are the most important CGT exemptions available:
• Principal Private Residence (PPR): The home you actually live in as your main residence is fully exempt. You can only have one PPR at a time. • Nigerian Government Securities: Gains on Federal Government Bonds, Treasury Bills, and similar government instruments are completely exempt from CGT. • Life Insurance Payouts: Gains on life insurance policies paid out on death or policy maturity are exempt. • Rollover Relief: If you sell a business asset and reinvest all the proceeds into a qualifying replacement asset, you can defer (delay) your CGT. The deferred gain reduces the cost base of the new asset. This is not a permanent exemption — you pay when you eventually sell the replacement asset. • Charitable and Religious Organisations: Exempt on gains where proceeds are used for their stated purposes.
Common Misconceptions Nigerians Have About CGT
"Capital gains are not taxable in Nigeria." This is FALSE. CGT has been a law since 1967 and applies to everyone — individuals and companies alike.
"If I hold an asset for a long time, I don't pay tax when I sell it." FALSE. There is no holding period exemption in Nigeria. Whether you held an asset for 2 years or 20 years, CGT still applies to the gain.
"Selling inherited property is always tax-free." Not always. If you inherit property and later sell it at a profit, CGT may apply to the gain from the date of inheritance to the date of sale.
"Only businesses pay CGT." FALSE. Individuals pay CGT through their State Internal Revenue Service. In fact, individuals are probably the most common CGT taxpayers in Nigeria through property and share sales.
"Gifting an asset to a family member avoids CGT." FALSE. The law treats gifts as disposals at market value (CGTA Section 4). If you transfer property to a family member for free or below market value, you are still treated as having sold it at its market value — and CGT is calculated accordingly.
Who Collects CGT — FIRS or Your State IRS?
This is a detail that trips many people up, and filing with the wrong authority can create compliance problems.
• Individuals pay CGT to their State Internal Revenue Service (SIRS) — for example, Lagos IRS if you live in Lagos, Rivers State IRS if you live in Port Harcourt, or FCTA IRS if you live in Abuja. • Companies pay CGT to the Federal Inland Revenue Service (FIRS). • Non-residents disposing of Nigerian assets also pay CGT to FIRS.
Your obligation as an individual is a self-assessment — there is no employer or third party automatically deducting CGT for you. You must proactively calculate what you owe, file your return, and make payment.
When Are CGT Returns Due?
For individuals: • Your CGT return must be filed with your State IRS by 31 March of the year following the year in which you sold the asset. • For example: if you sold an asset at any point during 2024, your return and payment are due by 31 March 2025.
For companies: • CGT returns are filed with FIRS within 6 months of the end of the company's accounting year in which the disposal occurred. • For example: if a company's year-end is 31 December 2024 and it sold an asset during 2024, the CGT return is due by 30 June 2025.
For property disposals specifically: • You must notify your tax authority of the disposal within 30 days of completing the transfer of title — even if you believe an exemption applies.
What Happens If You Don't Pay CGT?
Non-compliance with CGT carries real financial consequences:
• Late filing penalty for individuals: ₦25,000 initial penalty, plus ₦5,000 for every day the failure continues. • Late payment interest: approximately 21% per annum (CBN Monetary Policy Rate plus 5%) on unpaid CGT from the due date to the actual payment date. • Property transaction enforcement: Land registries are increasingly requiring Tax Identification Number (TIN) verification for property transfers. Unresolved CGT obligations can delay or block completion of property sales. • CGT evasion (deliberately hiding a disposal) carries more serious penalties under tax administration law.
The bottom line: the cost of non-compliance quickly exceeds the cost of simply paying your CGT on time.
What to Do Next: Your CGT Action Plan
If you have sold — or are planning to sell — an asset in Nigeria, here are the steps to take:
• Identify whether CGT applies: Ask yourself — is this an investment asset (CGT applies) or part of my regular business trading activity (income tax applies instead)? • Gather your purchase records: Dig out your original purchase documents, receipts for legal fees, agent commissions, and any receipts for improvements or upgrades. These reduce your taxable gain. • Check for exemptions: Is the property you're selling your main home? Is the asset a Nigerian government bond? These may be fully exempt. • Calculate your gain: Use the four-step method above — Allowable Cost, Net Proceeds, Chargeable Gain, then apply 10%. • Identify your tax authority: If you are an individual, contact your State Internal Revenue Service. If you are a company, contact FIRS. • File and pay by the deadline: Individuals must file and pay by 31 March of the year following the disposal. Do not wait for a reminder — there won't be one. • Notify your tax authority of property disposals: Even if you believe you are exempt (e.g., PPR exemption), notify your State IRS within 30 days of completing a property transfer. • Keep your records for at least 6 years: The tax authority can review past transactions, so preserve all documents related to asset purchases and sales.
Key Takeaways
• CGT in Nigeria is a flat 10% on the profit (not the full selling price) from disposing of investment assets — one of the lowest rates in Africa. • CGT applies to individuals and companies on land, shares, equipment, cryptocurrency, and most other valuable assets held as investments — not to assets that are part of regular business trading. • Your biggest CGT reduction tool is allowable costs — always keep receipts for purchase price, buying/selling fees, and capital improvements, as these reduce the gain you are taxed on. • The Principal Private Residence exemption is the most valuable relief available — if you sell the home you actually live in as your main residence, your entire gain is exempt from CGT. • CGT is a self-assessment tax — no one will automatically deduct it or remind you to file. Individuals must proactively file and pay with their State Internal Revenue Service by 31 March of the following year.