The Federal Government has moved to clarify Nigeria's new Capital Gains Tax framework, emphasizing that the reforms are designed specifically to protect small investors and reduce investment risks in the capital market.
Progressive Tax Rates Replace Flat System
The Presidential Fiscal Policy and Tax Reforms Committee, led by Chairman Taiwo Oyedele, explained that the revised framework will take effect on January 1, 2026, replacing the old flat CGT rate of 10% with progressive rates ranging from 0% to 30%. The tax rate will depend on the investor's income and profit level.
Oyedele, who provided these clarifications through his official X handle, noted that the top rate of 30% applies primarily to large corporate investors. He further revealed that this rate is expected to be reduced to 25% under the broader corporate tax reform currently being developed.
Exemptions and Deductions for Investor Protection
The new tax framework introduces several significant exemptions aimed at protecting vulnerable investors from losses. According to the committee's clarification, the following categories will be exempt from Capital Gains Tax:
- Small companies with annual turnovers not exceeding ₦100 million and total fixed assets below ₦250 million
- Disposals within 12 months where total sales proceeds do not exceed ₦150 million and total gains do not exceed ₦10 million
- Reinvestment of proceeds into shares of Nigerian companies within 12 months where general exemption thresholds are exceeded
- Capital gains from foreign share disposals repatriated into Nigeria through CBN-authorised channels
- Institutional investors enjoying corporate income tax exemption, including pension funds, real estate investment trusts (REITs), and non-profit organizations
- Gains from investments in labeled startups by venture capitalists, private equity funds, accelerators, or incubators
The new framework also permits investors to deduct costs such as capital losses and transaction charges, an arrangement that was not allowed under the previous CGT regime.
Fair Implementation and Compliance Methods
To ensure fairness in implementing the new tax rules, the committee has established that the cost base for existing investments will be reset to the higher of either the actual acquisition cost or the closing market price as of December 31, 2025.
Oyedele emphasized that "this ensures fairness and prevents the application of the new rule to gains accrued before the new law takes effect."
The compliance model will adopt self-assessment as the default method, while brokers or exchanges may be authorized to deduct CGT at source. Resident investors will be required to register for tax and obtain a Tax Identification Number, though non-resident investors earning only passive income such as dividends or capital gains will be exempt from this requirement.
The committee chairman confirmed that detailed guidelines for implementing these tax reforms will be provided through official regulations in the coming months.
