Baha's Books

Understanding Corporate and Insurance Taxation Under the Nigerian Income Tax Act 2025 By Baha’s Books Private Motor Vehicles and Capital Gains Under the Nigerian Income Tax Act 2025, motor vehicles used solely for personal or non-profit purposes are not recognized as taxable assets for Capital Gains Tax (CGT). This means that if you sell your private vehicle, the gain from the sale isn’t taxable. However, the exemption applies to a maximum of two vehicles per individual per year of assessment. Selling more than two vehicles within the same year could trigger CGT on the excess. Gifts and Capital Gains When an individual gives away an asset — whether land, cash, or property — as a gift , the transaction is not treated as a taxable gain, provided that no payment or exchange takes place. In other words, you don’t pay tax for giving or receiving a genuine gift . The law only treats it as a taxable disposal if money or other consideration changes hands. This clarification separates ...

Nigerian Capital Gains Tax: Special Rules on Shares, Insurance, Compensation & Private Assets The Nigerian Tax Act, 2025 introduces detailed provisions on how capital gains tax (CGT) applies to individuals, businesses, and even foreign investors. These rules cover everything from disposals of shares and insurance policies to compensation payouts, private residences, and personal property. Understanding these rules is critical for compliance and financial planning. 1. Non-Residents & Ownership Transfers Any gain made by a non-resident through the disposal of shares is chargeable if the transaction results in a change in the ownership structure of a Nigerian company or shifts ownership of assets located in Nigeria. This ensures that offshore restructurings that indirectly affect Nigerian companies or property cannot escape Nigerian taxation. For businesses, this means foreign shareholders must carefully evaluate the tax impact of share disposals tied to Nigerian operations...

Nigerian Capital Gains Tax: When Foreign Shares Are Taxed in Nigeria Understanding where an asset is “located” for tax purposes is one of the most technical but crucial parts of the Nigerian Capital Gains Tax (CGT) framework. This matters because it determines whether a transaction falls within Nigeria’s tax net, even when the asset being sold is not physically in Nigeria. The 2025 Nigerian Tax Act makes it clear that certain foreign shares and comparable interests can be treated as if they are located in Nigeria, thereby attracting Nigerian capital gains tax. The Rule on Foreign Entities Under section 46(f), shares or comparable interests in any foreign entity are deemed to be located in Nigeria if, at any point during the 365 days before their disposal (that is, before they are sold or transferred), more than 50% of their value is derived, either directly or indirectly, from Nigerian assets. This rule has two important applications: Indirect Ownership Through Entities : If ...

Nigerian Capital Gains Tax: Timing, Computation, and Fair Treatment of Asset Disposals Understanding how and when capital gains tax applies is essential for individuals and businesses in Nigeria. The Nigerian Tax Act 2025 sets clear rules on the date of acquisition or disposal , the computation of chargeable gains , the treatment of incidental costs , and how part disposals or instalment payments affect taxation. When Is an Asset Considered Acquired or Disposed? An asset is deemed to have been acquired or disposed of on the date a binding right or obligation arises. For instance, if a contract is conditional, the disposal date is when the condition is fulfilled. If it is unconditional, the contract date counts. In cases of options, such as call or put agreements, the disposal date is the day the option is exercised. This ensures tax is tied to the precise moment a financial interest is effectively transferred. How Chargeable Gains Are Computed The Act distinguishes between asset...

Understanding Chargeable Gains Under the Nigerian Tax Act 2025 The Nigerian Tax Act 2025 sets out clear rules on how chargeable gains —profits from the disposal of assets—are treated for tax purposes. This part of the law ensures that when individuals or companies benefit from selling, transferring, or otherwise disposing of assets, those gains are fairly taxed, except where exemptions apply. What Are Chargeable Gains? Chargeable gains are profits made when you dispose of assets. Assets in this context are broadly defined to include shares, debts, options, rights, digital or virtual assets, and all forms of tangible and intangible property, whether in Nigeria or abroad. The wide definition ensures that nearly all economic gains are brought within the tax system. Exemptions for Nigerian Company Shares While most gains are taxable, the law provides relief in certain cases. If the total disposal proceeds in a year are less than ₦150 million and the chargeable gain does not exceed ₦10...

Nigerian Tax Law: Understanding Eligible Deductions for Individuals When it comes to paying taxes in Nigeria, individuals often ask one key question: What deductions can reduce my taxable income? The Nigeria Tax Act, 2025 gives clear guidance on this, explaining how chargeable income is calculated and what expenses qualify as legitimate deductions. What Is Chargeable Income? Chargeable income is simply your total income for the year of assessment, minus the deductions that the law allows you to claim. These deductions are called “eligible deductions,” and they help lower the amount of tax you owe. Eligible Deductions You Can Claim The Act highlights several categories of deductions: Statutory Contributions : Payments you make into the National Housing Fund , National Health Insurance Scheme , or under the Pension Reform Act all qualify. Loan Interest : If you take a loan to develop an owner-occupied house , the interest on that loan is deductible. Insurance & Annui...