If you had two final decisions to make – deal in foreign currency transactions and make cool profits or invest in real property to sell later, which would be your answer – the penultimate or the ultimate?

I’d advise that you choose the penultimate just because it rhymes with the theme of Episode 1 since regardless of your choice, both transactions will still be subject to Capital Gains Tax!

Capital Gains Tax (CGT) is imposed by the Capital Gains Tax Act (CGTA) Cap C1 LFN 2004 at a rate of 10% when Companies and individuals in Nigeria make gains from the disposal of capital assets.

These assets e.g. land are not acquired with the intention of immediate resale or other disposal but as soon as they are disposed after increasing in value over time, Capital Gains accrue.

Disposal of assets that fall under the CGTA (chargeable disposals) are sale, lease, transfer, assignment, a compulsory acquisition or other disposition regardless of whether or not the person paying the capital sum actually acquires the asset.

The assets that the CGTA will apply to upon disposal (chargeable assets) are:

  1. Options, debts and incorporeal property e.g. goodwill, copyrights etc.
  2. Foreign currency;
  3. Any form of property created by the person who disposes it or who comes to own it without being acquired;
  4. All forms of property e.g. Real estate, precious metals, artworks, chattels over ₦1,000 – except those exempted by the CGTA.
  5. Assets situated outside Nigeria where the gain is brought or received into Nigeria.

Gains that the CGTA apply to (chargeable gains) include capital sums derived:

  1. As compensation for any loss of office or employment;
  2. As consideration for the use or exploitation of any asset; and
  3. In connection with any trade, business, profession or vocation.

CGT is thus a tax on chargeable gains arising from a chargeable disposal of chargeable assets.



The Federal Inland Revenue Service administers CGT in respect of Companies and individuals resident in the Federal Capital Territory including members of the Armed Forces, Police and foreign serving officers.

The State Internal Revenue Service e.g Lagos Internal Revenue Service (LIRS) administers CGT for individuals based on the rules of residence.

Definitely, not all assets are subject to CGT. Exempted assets include:

  1. Gains on stock, shares and other government securities such as treasury bonds, premium bonds and savings certificates;
  2. Ecclesiastical, charitable or educational institutions of a public character;
  3. Any statutory or registered friendly society;
  4. Any co-operative society registered under the Co-operative Societies Law of any state;
  5. Gains on policies of assurance or deferred annuity unless the beneficiary is not the original owner as in an estate;
  6. Gains arising from mergers, acquisitions or takeovers provided that no cash payment is made in respect of the shares acquired;
  7. Gains from a provident or retirement benefit scheme;
  8. Any diplomatic body;
  9. Gains on private vehicles; and
  10. Compensation for a wrong or injury of libel, slander, enticement.

Some expenses spent in acquiring the assets are also allowed to be deducted from gains a person makes on disposal of assets. They include:

  1. Initial cost of acquiring or providing the asset;
  2. Cost of enhancing the value of the asset;
  3. Expenditure incurred in establishing, preserving or defending the title to or right over the asset;
  4. Incidental expenses for disposing the assets e.g. omonile fees, stamp duties, surveyor’s fees, legal fees, etc;
  5. Cost of advertisement to find a seller during acquisition and advertisement cost to find a seller during disposal.

Expenses not allowed to be deducted from the gains a person makes on disposal of the assets include:

  1. Expenditure allowed as a deduction when computing the profits for the purposes of the Income Tax Acts e.g. PITA, CITA, PPTA.
  2. Any insurance premium or other payments made under a policy of insurance against the risks of any kind of damage or injury to, loss or depreciation of any asset.

Where one person in a transaction has control over the other, a Connected Person transaction is said to occur.

Where in transactions between Connected Persons, the disposal of the asset is not at arm’s length (i.e. where the price is highly discounted because of their familiarity), the CGT will regardless deem the disposal to be made at the market value of the asset.

Examples of Connected persons are:

  1. An individual’s husband or wife or relative of either;
  2. A trustee in settlement;
  3. Partners of a firm; and
  4. Person(s) in control of a company.

A sole trader, partnership or limited liability company carrying on a trade can use the proceeds of a disposal of a business asset to purchase a new similar asset. The seller will be entitled to Roll-over relief by postponing the CGT payable on the disposal of the old asset to the future when the new asset purchased is disposed of without being replaced by another similar asset being purchased.

The new asset must be acquired within twelve months before or twelve months after the disposal of the old asset.  Roll-over relief can be full or partial.

The classes of assets eligible for Roll-over relief are:

Class 1 – Buildings, Land, Plant or Machinery which doesn’t form part of the building.

Class 2 – Ships

Class 3 – Aircraft

Class 4 – Goodwill

A year of assessment in relation to capital gains tax is a year beginning with 1 January and ending with 31 Decmber.

Appeal from grievances or objections on CGT assessments go to the Body of Appeal Commissioners established under Section 71 of the Companies Income Tax Act.

A limitation period of six (6) years applies in respect of any chargeable gain after the end of the year of assessment in which the gain accrues.



Enny Money bought a piece of land situate in Lagos in 2011 for 200 million Naira. She spent 1.5 million naira to fence the land and paid 1 million Naira to perfect her title (i.e. Payment for Governor’s consent, Stamp Duties and Registration of the instrument of title).

In 2018, she sold the piece of land in for 500 million Naira and paid her solicitor 50 million naira.

In tax terms, Enny Money has made a chargeable gain (*in Davido’s voice* – 300 million for the account) on a chargeable disposal (the sale) of her chargeable asset (the land).

To compute Capital Gains Tax payable by Enny Money:

  1. Selling price of disposal of the asset minus Allowed Expenses (1.5m for fencing,1m to perfect title, 50m for the Solicitor) = Net Sales Proceeds.


₦500,000,000 – 52,500,000 = ₦447,500,000.


  1. Net Sales Proceeds minus Cost Price of Acquiring the Asset = Capital Gains.


₦447,500,000 – ₦200,000,000 = ₦247,500,000.


  1. Apply Capital Gains Rate of 10% to Capital Gains = Capital Gains Tax.


10/100 x 247,500,000 = ₦24,750,000 as CGT


So, on sale of the land at a price of ₦500,000,000, the LIRS gets to smell her awesome perfume when collecting their Twenty Five Million, Seven Hundred and Fifty Thousand Naira Tax!



The importance of wealth in the form of assets in our current day cannot be overemphasized. The fact that such wealth also appreciates and is routinely disposed on a monumental scale in Nigeria cannot be ignored, especially by the IRS.

In light of this, TSE had a recent discourse on Voluntary Assets and Income Declaration Scheme (VAIDS). VAIDS applies to Capital Gains Tax and as such, all individuals and Companies in Nigeria engaging in disposals of chargeable assets and defaulting in filing their CGT returns should seize the opportunity of the VAIDS amnesty period to regularize their tax defaults before June 30.



Akinoso Eniola is a Tax and Litigation Enthusiast, a Fellow of the Obama Young African Leaders Initiative and the National Matching and International Relations Coordinator for AIESEC in Mauritius. She writes stories and articles to contribute to her AIESEC-cultured love for the SDG’s and to bring pertinent issues in Nigeria to light. The Tax Series by Eniola is her latest initiative to stimulate interest in Taxation.

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