-Types of Taxes in Nigeria: Capital Gains Tax
YBTC NEWS-A capital gains tax is a tax levied on capital gains or profits from the sale of certain types of assets. Several countries across the globe makes provisions for capital gains under their tax laws in order to tax investors’ gains on disposal of certain properties.
This laws however differs in rate and mode of administration. In Nigeria, the Capital Gains Tax Act, cap C1, LFN 2004. The origin of CGT in Nigeria is traceable to 1967, just before the civil war began.
The determinant of the payable capital gains tax is the arithmetic difference between the sale price and the initial purchase price of the asset that is subjected to CGT. Hence, capital gains tax takes place when assets are being realized by an investor. That is, an asset will be taxed under CGT when it is being gotten and not when it is being held. So, it is at the point of buying and selling a particular asset that CGT will accrue. Common examples of assets that capital gains are realized from include: sale of stocks, bonds, precious metals, and property.
Capital Gains Tax is administered by then Federal Inland Revenue Service (FIRS) and like every other tax type, CGT also has a rate. The rate of CGT is 10%.
Examples of assets that attracts Capital Gains Tax under the Act are: Plant and Machinery, Incorporeal properties generally, land and buildings, among others.
However, not all assets are subject to Capital Gains Tax. Assets that cannot be subjected to
• Gains on Stock, shares, and other government securities such as treasury bonds, premium bonds and savings certificates
• Ecclesiastical, charitable or educational institutions of a public character
• Any statutory or registered friendly society
• Any co-operative society registered under the Co-operative
• Societies Law of any State in the Federation of Nigeria
• Gains on a decoration awarded for gallantry conduct; Gains accruing to statutory bodies etc.
Next week, we’ll discuss the very important and popular Personal Income Tax. Till then, we look forward to your questions, comments and contributions.
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