Finance Act: Review of the Changes to the Capital Gains Tax Act

Prior to the introduction of Finance Act 2019 and 2020 (FA 2019 & 2020), there has been no major changes or modification to the CGTA. In this article, we have highlighted and discussed the changes introduced to the CGTA by the FA 2020.

The history of Capital Gains Tax (CGT) is dated back to 1967 during the time when the finance of the Federal Government of Nigeria experienced a massive downfall due to the economic crisis caused by the Civil War in Nigeria. CGT was introduced with the promulgation of Decree No. 44 known as “The Capital Gains Tax Decree of 1967”. This was changed to Capital Gains Tax Act (CGTA) in 1993.

CGT is a tax charged on the gains (capital gains) derived from the sale of a chargeable assets. Capital gains is the excess of the proceeds from the sale of chargeable assets such as land, building, stocks, any currency - other than the Nigerian currency, copyrights, bonds and qualifying machinery and equipment etc. over the original cost of that asset.  CGT is however not charged on the gains arising from the disposal of Nigerian government securities, treasury bonds, saving certificates and premium bonds. In addition, when an ecclesiastical, charitable, or educational institute of a public character, a registered friendly society, registered co-operative society and trade unions dispose off an asset, the gain on such disposal would not be subjected to CGT. Furthermore, CGT is not charged on the gains from disposal of a decoration awarded to a person for valor or gallant conduct.

Requirement to File CGT Returns

The FA 2020 amends Section 2 of the CGTA by inserting a new Subsection (4), which provides for the time within which CGT returns must be filed. According to the amendment, “every person having disposed a chargeable asset shall, not later than 30 June and 31 December of that year, compute the capital gains tax, file self-assessment return, and pay the tax computed in respect of the chargeable assets disposed in the period”. Previously, there was no deadline specified for the filing of CGT returns. Taxpayers usually file their CGT returns along with their annual Company Income Tax returns. This amendment now provides certainty on the dates for filing CGT returns.

Location of Ship or Aircraft for CGT Purpose

The inclusion of the words “international traffic” in Section 24(f) of the CGTA provides the condition for determining the location of a ship and aircraft. A ship or aircraft used in international traffic is located in Nigeria if the owner, person entitled to the interest, right in or over the ship or aircraft is resident in Nigeria.

The phrase “used in international traffic” in this context would mean any ship or aircraft used for the movement of persons, cargo, baggage, container, goods or postal across an international border that is operated by a company that has its place of effective management in Nigeria. This ship or aircraft would be considered to be located in Nigeria for CGT purpose; therefore, gains derived from the disposal of such ship or aircraft will be liable to CGT in Nigeria.

Compensation for Loss of Office

The Finance Act 2019 had previously amended Section 36 of CGTA. However, the wordings of the Finance Act 2019 suggested that compensation for loss of office exceeding N10 million will be subject to CGT. It was however not clear whether it was the amount in excess of N10 million or the entire compensation that will be subject to CGT. In the FA 2020, the addition of a new paragraph 2 to Section 36 of the CGTA has now provided the needed clarification that only the amount in excess of N10 million will be subject to CGT and the person paying the compensation will be responsible for deducting and remitting the applicable CGT to the relevant tax authority.

Furthermore, the tax deducted is to be remitted within the time specified under the Operation of Pay-As-You-Earn (PAYE) Regulations and the Personal Income Tax Act (PITA).


The objective of the CGT is the same as other taxes, which is to raise revenue required to fund government expenditure. Over the years, government has intensified efforts to improve on non-oil revenue generation by exploring other sectors of the economy. This has resulted in amendment of tax laws in a bid to reducing all possible revenue leakages and providing flexible compliance requirements. 

The amendments to the CGTA seeks to reorganize the administration and collection of capital gains tax in Nigeria. It is expedient that corporate and individual taxpayers review their transactions as it relates to CGTA amendments to ensure compliance with obligations under the law.

Taxpayers are advised to consult with their tax advisors on how to ensure compliance with the extant laws and steps to be taken in the event they are incorrectly assessed.


Finance Act: Review of the Changes to the Capital Gains Tax Act
Finance Act: Review of the Changes to the Capital Gains Tax Act