Capital Gain tax was introduced in Nigeria by the promulgation of Decree No. 44 called The Capital Gain Tax Decree 1967. This was on the 19th of October 1967. It is said that one of the main reasons for the imposition of the capital gain tax is that the Nigerian government needed funds when the civil war was ripe in the country.<\/p>\n
What is Capital Gains Tax<\/strong><\/p>\n To simply put, Capital gain tax is the taxation levied on Capital Gains. A capital gains itself is simply an increase in the value of a capital asset over its actual purchase price, which thus gives it a higher value. Usually, the capital gain is not realized until the asset or investment is sold. For example, if land that has been acquired for over 10 years is sold, the price at which it was purchased 10 years ago and the new price at which it is sold is the capital gain.<\/p>\n Capital Gains is the excess gains from the sales of an asset over the original cost of that asset. Such assets could include land, building, stocks, equipment and even any currency other than the Nigerian currency, copyrights, bonds and others. Capital Gains Tax (CGT) is a tax levied on the gains obtained from disposal or sales or exchange of certain kinds of assets. This means that there are particular assets that are subject to the Capital Gains Tax. In Nigeria, Capital Gains Tax is calculated as 10% of the profits from the sale of capital assets.<\/p>\n Capital Gains Tax is recognized in Nigerian law, under the Capital Gains Tax Act. It is governed by Capital Gains Tax Act, Cap C1 LFN 2004 (as amended). All qualifying assets are subject to Capital Gains Tax as long as there is a gain. In Nigeria, Capital Gains Tax accrues on an actual year basis. Capital Gains Tax pertains to all gains accruing to a taxpayer (whether individual or company) from the sale, lease, exchange or transfer of assets. \u00a0The chargeable interest is subject to a capital gains tax of 10%. While Capital Gains Tax is 10% of a taxpayer\u2019s Capital Gains, the tax authorities in Nigeria provide guidelines for calculating how the Capital Gains Tax is arrived at and deducted. Expenses considered when calculating Capital Gains Tax are as follows:<\/p>\n Sales Proceeds<\/p>\n Net Sale Proceed<\/p>\n Deduct: Cost of Acquisition<\/p>\n Capital Gains<\/p>\n Less: Allowable Expenses<\/p>\n Certain expenses known as allowable expenses must be deducted from the sales proceeds before arriving at the Net Sales Proceeds. Allowable expenses include the following:<\/p>\n Note that expenses that are\u00a0typically considered under the company income tax are not considered under Allowable expenses. These include staff salaries, payment to suppliers, utility bills, etc.<\/p>\n How to Calculate Capital Gains Tax on an Asset<\/strong><\/p>\n Step 1: Identify what the Sales proceeds of the asset is after you have disposed of it.<\/p>\n Step 2: Deduct the allowable expenses (this is determined by the tax office). This will help you arrive at the Net Sales Proceeds.<\/p>\n Step 3: To get the Capital Gains, deduct the cost at which you acquired the asset originally from the Net Sales proceeds<\/p>\n Step 4. Multiply the Capital Gains by 10% to get the Capital Gains Tax.<\/p>\n Selling a part of an asset falls under partial disposal of assets. This is still subject to Capital Gains Tax. When part of an asset is sold, you will need to determine the cost of the part being disposed of.<\/p>\n ASSET CHARGEABLE<\/strong><\/p>\n Chargeable assets include the following property whether or not they are situated in Nigeria<\/p>\n No. The list below contains assets that are exempted from Capital Gains Tax<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Have you ever heard of Capital Gain Tax? It seems like such a big financial jargon. However, this article will … <\/p>\n![\"Capital](\"https:\/\/nigerianfinder.com\/wp-content\/uploads\/2020\/12\/Capital-Gains-Tax-in-Nigeria-Explained.jpg\")
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\nSuch chargeable assets may be material or immaterial and can be situated in or outside Nigeria. However, when the taxpayer or the company does not reside in Nigeria, the tax will only be levied on the amount received or brought in Nigeria.<\/p>\nWhat is Allowable Expenses<\/strong><\/h3>\n
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Frequently Asked Questions about Capital Gains Tax <\/strong><\/h3>\n
What if I sell part of an asset?<\/strong><\/h3>\n
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\u00a0Are all Assets Sold subject to Capital Gains Tax?<\/h3>\n
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\nNote: For gains which are also liable to be taxed abroad, the double taxation treaties apply.<\/li>\n
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