What capital gains tax means
Capital gains tax is a tax on the difference, not on the money that changed hands.
You bought a property for thirty million naira and sold it for fifty million. The gain is twenty million, less the costs the law allows you to deduct, and the tax is charged on what remains. Selling at a loss produces no gain and therefore no tax.
The deductible costs are those wholly, exclusively and necessarily incurred in acquiring, improving or disposing of the asset. So the purchase price, the cost of the improvements you made, agency commission and legal fees on the sale generally reduce the gain. Ordinary maintenance does not.
The rate in Nigeria is ten percent of the chargeable gain, which is low by international comparison and is one reason it attracts less attention here than it does elsewhere.
How it is used
It bites at the moment of disposal, and disposal is wider than a sale.
Selling land or a building. Selling shares in a company, subject to the rules that apply to share disposals. Selling business assets, goodwill or equipment. Giving an asset away or exchanging it can also be a disposal, because the law looks at the transfer rather than at whether cash moved.
For an individual, the tax is administered by the state internal revenue service of the state where you reside. For a company, it is administered by the Federal Inland Revenue Service.
In practice most Nigerian property sellers meet it through the buyer's lawyer, who will want evidence that the tax has been dealt with before completing the transfer, and through the state lands bureau, which will look for it as part of consent and registration.
Key features
- Charged at ten percent of the chargeable gain, not of the sale price
- Applies on disposal, which includes gifts and exchanges, not only sales
- Acquisition cost, improvement cost and disposal costs are deductible
- Administered by the state revenue service for individuals and the FIRS for companies
- A loss on disposal produces no chargeable gain
- Certain assets and situations are exempt
How this works in Nigeria
The exemptions are where the practical answers live, and they are the part sellers most often ask about.
Gains on the disposal of a person's principal private residence, on decorations awarded for gallantry, and on certain government securities have long been outside the charge. Gains applied to acquiring a replacement asset used for the same business purpose can attract rollover treatment rather than an immediate charge.
Share disposals have been the moving part. The treatment of gains on Nigerian company shares was revised by the 2021 reforms and revisited again in the tax reform legislation of 2025, which changed thresholds and reliefs. Because this area has changed more than once in recent years, confirm the current position with your adviser or the FIRS before completing a share sale rather than relying on what was true two years ago.
Compensation for loss of office also falls within the capital gains regime rather than income tax, with a threshold below which it is not charged, which matters to anybody negotiating an exit package.
Capital gains tax vs income tax vs stamp duty
Three taxes that can touch the same transaction, charged on different things.
Income tax is charged on what you earn from an activity. Trading profit, salary, rent received. If you buy and sell property as a business rather than as an investment, the profit may be taxed as trading income rather than as a capital gain, and the rates are very different.
Capital gains tax is charged on the increase in value of an asset you held, realised when you dispose of it. Ten percent of the gain.
Stamp duty is charged on the instrument, not on the profit. It is assessed on the deed or agreement that gives effect to the transaction, and it is a cost of doing the deal whether or not anybody made money.
On a single property sale a seller may face capital gains tax and a buyer stamp duty and registration fees, which is why the net proceeds are always less than the headline price suggests.
Limits and risks
The tax only reaches gains, so its practical reach is narrower than people fear. Sell at cost or at a loss and there is nothing to pay.
Record keeping is the real difficulty. The gain is measured against acquisition and improvement costs, and a seller who cannot evidence what they paid, or what the extension cost in 2013, has a weaker position when the assessment is raised. Keep the deed, the receipts and the invoices.
Collection is also uneven. Enforcement on property is tied to the transfer process, so it happens. Enforcement on private asset sales between individuals is far patchier, which does not make the liability disappear.
And the rules on shares have moved repeatedly, so old advice circulates widely and confidently. Check the current position rather than the position you remember.
Worth knowing
Keep the deed, the receipts and the invoices for every improvement you make to a property, in one folder, for as long as you own it. The tax is on the gain, and every naira of cost you can prove reduces it. Sellers who cannot document their costs pay tax on money they never made.
Questions people ask
What is capital gains tax in Nigeria?
It is a tax on the profit made when you dispose of an asset for more than it cost you, charged at ten percent of the chargeable gain rather than of the sale price.
How is capital gains tax calculated?
Take the disposal proceeds, deduct the acquisition cost, the cost of improvements and the costs of the disposal such as agency and legal fees. Ten percent of what remains is the tax.
Do I pay capital gains tax on my house?
Gains on a person's principal private residence have long been exempt from the charge. A second property or an investment property is a different matter, so confirm your position before completing a sale.
Who do I pay capital gains tax to?
Individuals pay to the internal revenue service of the state where they reside. Companies pay to the Federal Inland Revenue Service.
Is capital gains tax charged on shares in Nigeria?
The treatment of share disposals has been revised more than once in recent years, most recently in the 2025 tax reform legislation. Confirm the current thresholds and reliefs with the FIRS or an adviser before completing a share sale.
What if I sell at a loss?
There is no chargeable gain, so no capital gains tax arises on that disposal. Keep the documents showing what you paid and what you sold for, because that is what evidences the position.