Capital Gains Tax Under The Nigeria Tax Act 2025 – No Longer Business As Usual

Capital Gains Tax under the Nigeria Tax Act 2025 – No Longer Business as Usual

1. Introduction

The Nigeria Tax Act 2025 (NTA 2025), which came into effect on 1 January 2026, introduces a new framework for the taxation of capital gains in Nigeria. The Act repeals the Capital Gains Tax Act (CGTA), which for several decades provided the statutory basis for the taxation of chargeable gains arising from the disposal of certain assets.

Under the NTA 2025, capital gains taxation is more fully integrated into Nigeria's broader tax system, with enhanced provisions governing the scope of chargeable assets, the computation of chargeable gains, and the taxation of a wider range of transactions. The Act introduces clearer rules and expanded coverage that reflect the increasing complexity of modern commercial arrangements and investment structures. These changes have important implications for businesses and investors. Accordingly, capital gains tax considerations are likely to assume greater significance in transaction planning and execution.

This article examines the capital gains tax provisions of the NTA 2025, highlighting the key areas in which the new regime departs from the CGTA and assessing the practical implementation challenges and implications of these developments for businesses and investors.

2. What has Changed and What are the Implications?

Integration of Capital Gains into a Unified Tax Framework

Under the repealed CGTA, capital gains taxation was governed by a standalone statute that existed largely in isolation from the Companies Income Tax Act (CITA), the Personal Income Tax Act (PITA), and other fiscal legislation. This structural separation reinforced the distinction between capital income and ordinary income, resulting in capital gains being taxed at a flat and relatively low rate, irrespective of a taxpayer's overall income profile.

The NTA 2025 fundamentally alters this position by subsuming capital gains taxation into a consolidated tax framework. In line with section 4 of the NTA 2025, gains arising from the disposal of chargeable assets are now taxed at the same rate applicable to the taxpayer's income or profits for the relevant year of assessment. This eliminates the distinction between capital and ordinary income/profit and taxes gains from asset disposals at parity with other forms of profit.

In practical terms, this means that capital gains are no longer subject to the standard rate of 10%. Where a company is liable to income tax at 30% in a financial year, any chargeable gains realized in that year are also taxed at 30%. Similarly, capital gains realized by individuals will be added to the total taxable income and taxed at the applicable income tax rate based on the progressive tax band of the individual.

Let's look deeper at the practical impact - many companies will see an increase in the tax on capital gains and this could go as high as 85% for companies operating in the upstream oil and gas industry with licenses under the Petroleum Profit tax Act (PPTA) regime.

Transactions that previously attracted relatively modest tax exposures are now subject to materially higher exposures, thereby increasing the overall fiscal cost of disposal.

For example, a $100 million gain that previously attracted $10 million in tax under the CGTA could now result in a liability of $30 million or as high as $85 million for companies under the PPTA regime. Transactions once considered modest in tax impact now carry significant fiscal costs.

Additionally, the timing of capital gains creates distinctive challenges that differ from the treatment of ordinary income. Ordinary income reflects short-term value creation and is taxed on a recurring basis, with liabilities arising shortly after the income is earned. This system ensures a steady rhythm of reporting and assessment, aligning taxation with the periodic generation of profits.

Capital gains by contrast often represent long-term value that has accumulated gradually over many years or even decades. When such gains are eventually realized, the entire amount is compressed into a single assessment period. Under the NTA 2025, the removal of the fixed 10% rate means that these gains are now taxed at the same rates as ordinary income earned within the year. This shift intensifies the impact of the compression: when combined with ordinary income, a large gain can push individual taxpayers into higher marginal tax bands, significantly magnifying their overall liability in that year.

In many jurisdictions, a different approach is taken to soften the impact of this timing mismatch. Canada and South Africa for example, adopt a partial inclusion model, where only a portion of the gain is added to taxable income, reducing the immediate burden. Australia and India distinguish between short-term and long-term gains, offering reliefs such as indexation or discounts to account for inflation and holding periods.

Nigeria's approach under the NTA 2025 diverges from these models. By fully integrating capital gains into ordinary income without any mitigating reliefs, Nigeria subjects taxpayers to a sharper tax impact at the point of disposal. Value that has built up over time is taxed as if it were generated in a single year, creating a mismatch between economic reality and tax liability. For businesses and investors, this means that transaction planning must now account not only for the size of the gain but also for its timing, as the fiscal consequences of disposal may be far greater than under the previous regime

Indirect Transfers and Look-Through Rules

One of the most significant developments under the NTA 2025 is the extension of capital gains taxation to indirect transfers.

Under the CGTA, capital gains tax generally applied to the disposal of chargeable assets by individuals and companies, including shares in Nigerian companies following the amendments introduced by the Finance Acts. However, disposals of shares in offshore holding companies were typically outside the scope of Nigerian capital gains tax.

The NTA 2025 closes this gap by treating the disposal of shares or interests in a non- resident entity as a taxable event in Nigeria where the disposal results in:

• a change in the ownership structure or group membership of a Nigerian company; or
• a change in the ownership of, title to, or interest in any asset located in

In effect, the law allows the tax authority to look beyond the legal form of an offshore transaction and focus on its underlying economic substance. Even though the shares being disposed of are in a non-resident company, the transaction may be subject to Nigerian tax if it leads to a change in control of a Nigerian company or Nigerian-situated asset.

This provision targets multi-tier holding structures commonly used in private equity and multinational investment models and represents a significant expansion of Nigeria's taxing rights. However, its practical application raises several important questions.

Detection is the first hurdle. Since these transactions occur offshore, often between

non-resident entities, it is not immediately clear how the Nigerian tax authority will become aware that such a disposal has taken place. Unless Nigerian companies themselves are required to report changes in their indirect ownership structure, or foreign parties are compelled to disclose. Yet the law does not currently spell out reporting obligations. Hence, there is a real risk that many transactions may escape notice altogether.

Valuation is equally complex. While the law makes clear that any offshore disposal resulting in a change of ownership of a Nigerian company or Nigeria-situated asset is taxable, it does not specify how the taxable gain should be calculated when the transaction involves multiple subsidiaries across different jurisdictions. Without clear valuation rules, disputes are likely to arise over how much of the transaction's value should be attributed to Nigeria, and how the gain should be measured.

Further, this provision raises double taxation concerns for non-resident investors, particularly in cross-border holding structures. This would occur in a situation where the non-resident disposing of shares is liable to pay tax in its home country on the gains arising from the disposal and the same gain is taxed in Nigeria. This would also impact non-residents in countries with Double Tax Treaties (DTT) with Nigeria where the DTT do not yet incorporate indirect transfer rules or provide clear relief.

Private equity funds and multinational investors must now factor in potential Nigerian tax exposure when planning their investments and exits. This underscores the importance of proactive structuring at the entry stage, not just at the point of exit.

Taxation of Digital or Virtual Assets

The NTA 2025 introduces express provisions bringing digital or virtual assets within the scope of capital gains taxation. This represents a significant development, as such assets were not expressly addressed under the CGTA, which predated the emergence and widespread adoption of digitally represented assets.

Under the NTA 2025, digital or virtual assets include but are not limited to crypto assets, utility tokens, security tokens, non-fungible tokens (NFT) etc. By expressly recognizing these assets as chargeable, the NTA 2025 provides a clearer statutory basis for taxing gains derived from modern forms of value creation and aligns Nigeria's capital gains tax regime with evolving economic realities.

However, the question of compliance and reporting remains unresolved. Unlike traditional assets, digital assets are often held in decentralized wallets or traded on offshore exchanges, outside the reach of conventional regulatory oversight. This raises fundamental concerns about how the Nigerian tax authority will detect disposals and enforce compliance. Without robust reporting obligations or cooperation with digital asset exchanges, many transactions may go undetected, undermining the effectiveness of the law.

Digital assets present unique challenges because of their volatility, with values changing multiple times in a single day. In practice, disposals can occur in two ways: either directly into fiat currency, or through a swap into another digital asset. This raises an important policy question: should capital gains be measured at the point of disposal or only when the asset is ultimately converted into fiat? Closely linked is the issue of settlement: will the tax

authority require taxes to be paid strictly in fiat currency, or will it permit settlement in the digital currency of the transaction?

In addition, investors often face significant charges from crypto exchanges and virtual asset service providers (VASPs), who act as intermediaries in the disposal and conversion process. These costs are incurred after the gain is realized but before the investor receives the proceeds. Will such charges be deductible in calculating taxable gains? Clear guidance on these issues will be essential to ensure consistent application of the law.

Increased Tax Exemption Threshold for sale of shares

The Finance Act 2021 amended section 30 of the CGTA and subjected the gains accruing to a person on disposal of its shares in a Nigerian company registered under the Companies Allied Matters Act (CAMA) to CGT. It further provided exemption from CGT if the following conditions are met:

1. The proceeds from such disposal are reinvested within the same year of assessment in the acquisition of shares in the same or other Nigerian companies. Provided that tax shall accrue proportionately on the portion of the proceeds which are not reinvested in the manner stipulated in this subsection.
2. The disposal proceeds in aggregate, is less than ₦100,000,000 in any 12 consecutive months, provided that the person making the disposals renders appropriate returns to the relevant tax authority on an annual basis.
3. The shares are transferred between an approved Borrower and Lender in a regulated Securities Lending Transaction as defined in the Companies Income Tax Act.

The NTA 2025 has now increased the threshold in (ii) above to ₦150,000,000 with an additional condition that the chargeable gains do not exceed ₦10,000,000 in any 12 consecutive months. In practical terms, the NTA 2025 narrows the scope of the exemption despite the increase in the disposal proceeds threshold. While taxpayers may now dispose of shares with aggregate proceeds below ₦150,000,000 without triggering CGT, the exemption will only apply where the actual chargeable gain does not exceed ₦10,000,000 within the same 12-month period. As a result, transactions with relatively high gains but modest gross proceeds will no longer qualify for relief.

This change effectively shifts the focus from the size of the transaction to the value of the gain realized, ensuring that economically significant share disposals are brought within the tax net. Taxpayers will therefore need to assess both disposal proceeds and chargeable gains when determining CGT exposure, as satisfying the proceeds threshold alone is no longer sufficient.

Revised Basis for Computing Chargeable Gains on Capital Allowance Assets

The NTA 2025 also modifies the basis for computing chargeable gains on assets in respect of which capital allowances have been claimed.

Under the former CGTA, chargeable gains were generally calculated by deducting the historical cost of an asset from its disposal proceeds, after considering relevant adjustments. Separately, for income tax purposes, where capital allowances had been claimed, the disposal proceeds were compared to the tax written down value (TWDV) of the asset to determine any balancing charge or balancing allowance.

Under the NTA 2025, chargeable gains on the disposal of assets for which capital allowances have been claimed are determined by deducting the residual value (i.e., the TWDV) from the disposal proceeds. This approach eliminates the need for balancing charge or allowance computations and simplifies the overall calculation.

It is important to note that, for assets on which capital allowances have not been claimed, chargeable gains continue to be computed by deducting the acquisition cost from the disposal proceeds.

Given this revised calculation, companies disposing of assets may face increased tax exposure where such assets are sold for an amount below their residual value. In such cases, the disposal does not give rise to any allowance or relief to recognise the economic loss suffered on the asset. As a result, companies may be unable to obtain tax relief for losses arising from the disposal of impaired, obsolete, or underperforming assets, notwithstanding that those assets may have been integral to the business and subject to capital allowance claims over time.

From a practical perspective, this increases the effective tax cost of asset disposals and places greater emphasis on disposal pricing, timing, and transaction planning. Businesses may need to reassess asset management strategies and factor potential unrecovered tax costs into decisions involving the sale of capital assets.

3. Conclusion

The NTA 2025 marks a decisive departure from Nigeria's previous capital gains tax regime. By integrating capital gains into the broader tax framework, extending coverage to indirect transfers, and expressly including digital assets, the Act signals that capital gains taxation has moved from the margin to become an integral part of Nigeria's consolidated tax framework.

For businesses and investors, the implications are clear. Capital gains tax can no longer be treated as peripheral or secondary in transaction planning. Careful structuring, proactive engagement with advisers, and early consideration of reporting and valuation issues are now essential to managing risk. At the same time, policymakers must provide detailed guidance to ensure that detection, valuation, and enforcement mechanisms are workable in practice.

Ultimately, the NTA 2025 reflects Nigeria's determination to modernize its tax system and align with global trends. The message is unmistakable: capital gains tax in Nigeria has moved to the forefront of fiscal considerations. It is, indeed, no longer business as usual.

The opinion expressed in this article is solely personal and does not represent the views of any organization or association to which the authors belong.