New Nigeria Tax Law Redefines Capital Gains Tax for Individuals

Nigeria’s new tax act, which took effect Jan. 1, marks a fundamental shift in the treatment of capital gains for individuals. By integrating capital gains into the personal income tax framework, Nigeria moves away from the long-standing flat-rate model and introduces a more progressive, income-aligned approach.

This reform has significant implications for individuals disposing of property, investments, and other chargeable assets.

Under the new law, a chargeable gain arises when an individual disposes of a chargeable asset for proceeds exceeding its acquisition cost. Disposal is broadly defined and includes sales, exchanges, transfers, or gifts of assets.

Chargeable assets encompass virtually all forms of property—tangible and intangible, whether located in Nigeria or abroad. In practice, this includes land, buildings, shares, stocks, securities, options, debts, digital assets, goodwill, and other incorporeal property. Assets expressly excluded by law include private motor vehicles, personal effects used for domestic purposes, and assets held within approved pension schemes or qualifying charitable structures.

Rates and Thresholds

A key reform is the elimination of the former flat 10% capital gains tax rate for individuals. Chargeable gains are now taxed at the individual’s applicable personal income tax rate, using the same progressive tax bands that apply to other income.

The new law introduces a revised personal income tax structure, with the first ₦800,000 ($576) of total income—including chargeable gains—exempt from tax and marginal rates rising progressively to a maximum of 25%. As a result, capital gains are aggregated with other income to determine the applicable tax rate.

This means that modest gains realized by low-income individuals may fall entirely within the tax-free threshold, while larger gains earned by higher-income taxpayers may be taxed at higher marginal rates.

By contrast, companies are subject to a flat 30% tax on chargeable gains, which aligns capital gains taxation with corporate income tax.

Chargeable Gains Computation

Chargeable gains are computed as the difference between disposal proceeds and allowable costs. Such allowable deductions include:

• The original acquisition cost of the asset
• Capital expenditure incurred to enhance or improve the asset
• Incidental costs of acquisition and disposal, such as legal fees, valuation fees, brokerage commissions, advertising costs, and stamp duties

Only expenses incurred wholly and exclusively for the acquisition, enhancement, or disposal of the asset are deductible. Interestingly, general or financing expenses such as interest on loans used to acquire assets aren’t allowable.

The new law prohibits indexation for inflation, and capital losses aren’t deductible or available for offset against gains from other disposals. Each asset disposal is assessed independently, and a loss simply results in no taxable gain.

Exemptions and Reliefs

The new law preserves and expands several exemptions aimed at protecting personal and socially beneficial transactions. Some notable exemptions include:

Principal private residence. An individual is entitled to a one-time exemption on the disposal of a principal private residence. The exemption applies to the dwelling house and up to one acre of adjoining land used for domestic purposes, provided the property is the individual’s main residence. Only one property may benefit from this exemption during the individual’s lifetime.

Personal chattels and private vehicles. Personal-use movable assets, including household items and personal effects, are generally excluded from capital gains tax. Private motor vehicles used for non-commercial purposes are also exempt, subject to a limit of two disposals per individual per year.

Compensation for injury or loss. Compensation, damages, or insurance proceeds received for personal injury, loss, or professional harm are exempt from capital gains tax up to ₦50 million ($36,001). Only amounts exceeding this threshold may be chargeable.

Pension and retirement assets. Gains arising within approved pension or retirement benefit schemes are exempt, ensuring that retirement savings aren’t eroded by capital gains taxation.

Charitable and public-interest assets. Assets held on trust for charitable, religious, or qualifying public-interest purposes are exempt, provided they’re used solely for those purposes.

Sale of Nigerian shares. To support capital market development, gains from the disposal of shares in Nigerian companies are exempt where total proceeds don’t exceed ₦150 million ($108,003) in a 12-month period and total gains don’t exceed ₦10 million ($7,200). This exemption primarily benefits individual investors and small portfolio disposals.

Gifts and inherited assets. Transfers by way of gift are treated as disposals at market value. This potentially could trigger a chargeable gain for the donor. However, gifts to exempt entities, such as registered charities, benefit from existing exemptions.

Inheritance is treated a bit more favorably. The transfer of assets of the deceased doesn’t constitute a chargeable disposal. Instead, the heirs are deemed to acquire inherited assets at their market value at the date of death. This effectively resets the cost base and tax to only the post-inheritance appreciation upon subsequent disposal.

Looking Ahead

Taxpayers are expected to report the chargeable capital gains as part of an individual’s annual personal income tax return. Taxpayers also must maintain adequate documentation to support acquisition costs, enhancement expenditures, exemptions claimed, and disposal proceeds, as the tax authority may request evidence to substantiate any reliefs or deductions claimed in the return.

The new law repositions capital gains tax for individuals within a broader income-based framework as it aligns tax liability with economic capacity rather than the transaction. While the reforms broaden the tax base, extensive exemptions ensure that ordinary personal transactions, such as the sale of a primary residence or personal assets, remain largely unaffected.

In effect, capital gains tax is now more targeted at significant investment disposals, which reinforces equity, transparency, and compliance within Nigeria’s evolving tax system.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Adegbola Thomas is head of tax at FIRST Exploration & Petroleum Development Co. in Nigeria and previously was a senior manager at KPMG in Nigeria.

Write for Us: Author Guidelines