Capital Gains Taxation in Nigeria
In Nigeria, capital gains are subject to taxation under the Personal Income Tax Act (PITA) and the Companies Income Tax Act (CITA). The tax treatment of capital gains varies depending on the taxpayer's status (individual or corporate) and the nature of the asset disposed of.
Definition of Capital Gains
Capital gains refer to the profit realized from the sale or disposal of capital assets. Capital assets include:
- Real estate properties
- Stocks and shares
- Bonds and debentures
- Business assets
Calculation of Taxable Capital Gains
Taxable capital gains are calculated as the difference between the selling price of the asset and its acquisition cost. The formula for calculating capital gains is:
Capital Gain = Selling Price - Acquisition Cost - Expenses
Adjustments or deductions may be allowed in the calculation of the gain, including expenses related to the sale (e.g., brokerage fees, legal fees) and any improvements made to the asset during ownership.
Tax Rates
Capital gains are taxed at different rates depending on the taxpayer's status and the nature of the asset disposed of.
- Individuals: Capital gains realized by individuals are taxed at a flat rate of 10%.
- Companies: Capital gains realized by companies are taxed at the corporate income tax rate of 30%.
Legal Framework
The taxation of capital gains in Nigeria is governed by the following legal provisions:
- Personal Income Tax Act (PITA): Section 33(1) defines capital gains and outlines the tax treatment for individuals.
- Companies Income Tax Act (CITA): Section 17(1) defines capital gains and outlines the tax treatment for companies.
Policy Objectives
The taxation of capital gains in Nigeria aims to:
- Generate revenue for the government
- Ensure that individuals and businesses contribute their fair share of tax on profits realized from investments and asset disposals
- Promote investment and economic growth
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