Investors to pay 10% Capital gain tax on sale of shares in any Nigerian company

In the Nigerian Stock Exchange Investors are to pay a Capital Gains Tax of 10% on the sale of shares according to provisions of the signed Finance Act 2021. The tax is applicable on the disposal of shares worth N100 million and above.

This was captured under Part 1 Section 1. Of the Act, which states as follows;

“Without prejudice to any other applicable law, the gains accruing to a person on disposal of its shares in any Nigerian company registered under the Companies and Allied Matters Act shall be chargeable gains under this Act except where —

(a) 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;

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(b) the disposal proceeds, in aggregate, is less than N100,000,000 in any 12 consecutive months, provided that the person making the disposals shall render appropriate returns to the Service on an annual basis; or

(c) the shares are transferred between an approved Borrower and Lender in a regulated Securities Lending Transaction.”

The act also specifies a capital gains tax of 10% on the disposal of the shares.

“Without prejudice to the provisions of section 2 of this Act, the rate of capital gains tax on disposal of shares under this section shall be 10%.”

The tax also extends to anyone selling shares of any company even if the shares are not listed on the stock exchange which inadvertently includes the sale of shares by private equity firms, startups, venture capitalists, or any shareholder looking to sell shares in Nigeria.

The law however exempts anyone who sells shares and reinvests the proceeds in purchasing another company’s shares or the shares of the same company within the same year. However, this is provided that you invest all the proceeds within a year. Any part of the proceeds not reinvested will be taxed while the balance reinvested will not be taxed.