Understanding Chargeable Gains Under the Nigerian Tax Act 2025

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 million, then no tax applies. Exemptions also exist for approved securities lending transactions, and for reinvestments where the proceeds from selling shares are reinvested within the same year into shares of Nigerian companies. However, any part not reinvested will still be taxed.

What Counts as Disposal?

The law expands the meaning of “disposal.” It doesn’t only mean selling an asset outright. It includes leases, assignments, compulsory acquisitions, transfers, or even situations where compensation or insurance payments are received. For example, insurance payouts for loss or damage, compensation for loss of employment, or surrendering rights are all considered disposals. Even a partial disposal—such as selling only part of a property or granting rights over it—is recognized as taxable.

Valuation and Market Value Rules

Where transactions are not at arm’s length, or where no clear monetary value is provided (such as gifts, inheritances, or trustee dealings), the law assumes the market value of the asset applies. This ensures fairness and prevents undervaluation. Similarly, if an asset is transferred subject to a liability, that liability is included in the taxable consideration.

Nominees, Trustees, and Security Transfers

Transactions involving trustees, nominees, or transfers for security purposes are generally disregarded for tax. This is because such transactions do not represent a genuine change in beneficial ownership. However, creditors who acquire assets to settle debts must account for any chargeable gains, though capped to ensure they are not taxed beyond the fair value of the debt settlement.

Compulsory Acquisition of Land

Where government authorities acquire land compulsorily under the Land Use Act or similar laws, no tax applies on the gains—provided the land was not acquired in bad faith, such as buying it specifically to profit from the compulsory acquisition. This provision protects landowners while closing loopholes for speculative abuse.

Why This Matters

The rules on chargeable gains are designed to create fairness in Nigeria’s tax system. By clearly defining disposals, applying market value standards, and recognizing exemptions, the Act ensures that legitimate economic gains are taxed while protecting individuals and businesses from unfair burdens.

At Bahas Books, we break down complex tax laws into practical insights to help businesses and individuals understand their obligations and plan smarter. To learn more about tax rules that affect your operations, visit bahasbooks.com.

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