Tax on Capital Gains in Nigerian Capital Market and Equity Investments under the Finance Act 2021 – Taxation

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It is now a well-established norm that tax laws are periodically reviewed in Nigeria in line with the National Tax Policy adopted by the Federal Executive Council in 2018.1. Since 2019, the National Assembly has always accompanied the finance law with the finance law with a view to agitating the annual budgetary performance and controlling the economy through the fiscal tool. The Appropriation Act, based on the macro-economic policy of the Federal Government in any fiscal and fiscal year, amends relevant tax laws and related laws, including the Capital Gains Tax Act. capital.2. The Finance Act (FA) 2021 is no exception.

In accordance with his constitutional powers, the Finance Act 2021 which amended thirteen laws of the federation was assented to by the President of the Federal Republic of Nigeria on December 31, 2021. The amendment took effect on January 1, 2022.3and shall continue in effect as the existing legal order guiding the administration and administration of all provisions of the Tax Laws so amended. As a reminder, the 2021 finance law amends the following laws:

  1. Capital Gains Tax Act

  2. Corporation Income Tax Act

  3. Law on customs, excise duties, etc. (consolidation)

  4. Federal Inland Revenue Service Establishment Act

  5. Law on finance (control and management)

  6. Fiscal Responsibility Act

  7. Insurance Act

  8. National Agency for Science and Engineering Infrastructure Act

  9. Nigeria Police Trust Fund (Establishment) Act

  10. Personal Income Tax Act

  11. Stamp Duty Act

  12. Higher Education Trust Fund (Establishment) Act

  13. Value Added Tax Act

The scope of this article is limited to current changes to capital gains tax in relation to the capital market, i.e. the financial system involved in the raising of capital by trading in stocks, bonds, shares, savings certificates, securities and other long-term securities. investments. The following people and bodies are the main players in the Nigerian capital market: the Nigerian Stock Exchange (NSE), the Securities and Exchange Commission (SEC), local and foreign individual investors and corporate investors. This article will examine the current legal framework for capital gains tax in relation to the disposal, acquisition and/or sale of stocks, bonds, stocks or securities on the market Nigerian capital.

Capital Gains Tax (CGT) is the levy imposed on gains arising from the disposal of taxable assets under the primary legislation, i.e. the Capital Gains Tax Act. capital (CGTA) at the flat rate of 10%.4. Taxable assets include:

  1. choice,

  2. debts

  3. stocks and shares

  4. intangible assets in general;

  5. any currency other than Nigerian currency; and

  6. any form of property created by the person who disposes of it, or which otherwise becomes the owner without being acquired,

Putting things into perspective, any form of ownership created by the person who disposes of it is large enough to accommodate so many intangible assets such as goodwill and franchise rights. It is important to note that the CGT is not systematically applied by the competent tax authority. There are three conditions to be met5:

  • disposal of taxable property;

  • the taxable gains or profits must have been realized from the disposal;

  • the person who owns the property or property is not exempted by law.

There is a disposition of property when a capital sum comes from a sale, rental, transfer, assignment, compulsory acquisition or any other disposition of property, even if no property is acquired by the person who pays the capital sum.


As stated earlier, this article focuses on the application of capital gains tax to profits or gains made on the disposal of shares of any company in Nigeria or government stocks, bonds or securities. . It is essential to examine the old legal order being the CGTA 2004 to fully understand the paradigm shift in what constitutes the new legal order on the tax liability of investors in the Nigerian capital markets, stocks and shares. Capital gains tax was first introduced in Nigeria in 1967 as a federal law and has become an integral part of the revenue generation law till date. This was later compiled into the Laws of the Federation of Nigeria, 1990 and 2004 respectively; hence the Capital Gains Tax Act (CGTA).

Under the combined reading of sections 2 and 3 of the CGTA, 2004, stocks, shares and securities (except bonds, stocks and securities issued by the federal government) are subject to tax on capital gains at the rate of 10%. However, as part of its macro-economic policy, the federal government exercised its authority under the Companies and Related Matters Act (CAMA) and issued a CGT Exemption Order for companies duly registered in Nigeria. This exemption order6, which took effect from January 2, 2012, expressly suspended the imposition of CGT on any transfer of shares of companies duly registered under CAMA for a period of ten years from the date of commencement. By the passage of time, the 10-year exemption automatically ended on January 1, 2022.

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1. The Federal Executive Council adopted the National Tax Policy (NTP) on February 7, 2018. According to the contents of the NTP, the tax laws are supposed to be revised periodically in accordance with the macroeconomic reforms of the federal government.

2. In 2019, the Finance Law amended pursuant to Article 49 replaced a new Article 32 of the CGTA to the effect that transfers of shares during any reorganization of companies such as mergers and acquisitions are not not subject to capital gains tax.

3. See Federal Official Gazette No. 10 Vol 109 dated and published January 18, 2022.

4. See subsection 2(1) of the CGTA. The same rate is retained for the disposal of shares in Article 2(3) of the FA 2021 which amended the provision of Article 30 of the CGTA

5. The Federal High Court married the law in the case of United Investments Ltd v. Attorney General of the Federation (1922 – 2014) 3 All NTC 207 at 221 – 222to the effect that no capital gains tax is due if there has been no transfer of assets under the CGTA.

6. The exemption is known as
Corporation Income Tax (Exemption for Bonds and Short-Term Government Securities) Order 2011.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.


Overviews of the finance law, 2021

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His Excellency, President Muhammadu Buhari, GCFR promulgated the Finance Law 2021 (“the Law”) on December 31, 2021, following its adoption by the National Assembly.

2021 Finance Law: Impact analysis

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On December 31, 2021, His Excellency, President Muhammadu Buhari, GCFR, promulgated the Finance Bill 2021 as the Finance Act 2021 (“the Act”).

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