CAPITAL GAINS TAX
Capital gains tax is a form of tax imposed on the profit or gain derived from the sale or disposal of capital assets. In Nigeria, capital gains tax (CGT) is governed by the Capital Gains Tax Act Cap C1 LFN 2004 (as amended).
- Scope of Capital Gains Tax:
All chargeable assets are subject to Capital Gains Tax when disposed at a gain, except those specifically exempted by the Act.
- Calculation of Capital Gains Tax:
The capital gains tax is calculated based on the chargeable gains derived from the sale of a capital asset. The chargeable gain is determined by deducting the cost of acquisition or valuation of the asset (adjusted for inflation) from the sale proceeds. The resultant gain is subject to tax at the prevailing capital gains tax rate.
- Capital Gains Tax Rates:
Currently, the capital gains tax rate in Nigeria is 10% of Chargeable Gain Tax. However, it’s important to note that tax rates are subject to change, so it’s advisable to consult the current tax laws or a tax professional for the most up-to-date rates.
- Exemptions and Allowances:
Gains exempted from CGT include those arising from disposal of decorations awarded for valour and gallant conduct, life insurance policy, Nigerian government securities, stock and shares etc.
Allowable expenditure for the purpose of CGT includes fees, commissions or remunerations paid for professional services and cost of transfer.
- Compliance and Filing Requirements:
Individuals and companies who realize chargeable gains are required to file a capital gains tax return with the Federal Inland Revenue Service (FIRS). The due date for filing return and payment is the same as in company income tax.
- Penalties for Non-Compliance:
Failure to comply with the capital gains tax regulations may result in penalties, including interest charges on outstanding tax liabilities and possible legal actions.
It’s important to note that tax laws and regulations are subject to change, so it’s recommended to consult the current legislation or seek professional advice from a tax expert or the Federal Inland Revenue Service (FIRS) for the most accurate and up-to-date information.