How Is Capital Gains Tax Calculated on Property Sales in Lekki?

Introduction

When it comes to selling property in Lekki — one of Nigeria’s most rapidly appreciating real estate corridors — understanding how Capital Gains Tax (CGT) works is crucial. Property transactions in Lekki are often large-value, high-return investments, and the tax implications can be significant. Unfortunately, many property owners, investors, and even some real estate agents misunderstand or completely overlook this statutory obligation.

Capital Gains Tax is a legally enforceable tax levied by the Federal Inland Revenue Service (FIRS) on the profit (or gain) made when you sell, transfer, or dispose of a property for more than it cost you to acquire it. This tax is governed by the Capital Gains Tax Act, Cap C1 Laws of the Federation of Nigeria 2004 (as amended).

In this article, we will explore what Capital Gains Tax truly means, how it is calculated on property sales in Lekki, the applicable rates, allowable deductions, exemptions, payment procedures, compliance challenges, penalties for non-payment, and professional strategies to lawfully minimize liability. We will also analyze a practical case study, include FAQs, and end with professional insights from Chaman Law Firm, Lagos.

Understanding Capital Gains Tax in Nigeria

Capital Gains Tax (CGT) is a tax on the profit realized from the sale of a capital asset. In property terms, it means any monetary gain derived from selling a house, land, or building that has appreciated in value since it was originally purchased.

The Capital Gains Tax Act applies to all chargeable gains accruing to individuals, companies, partnerships, and trustees in Nigeria. The tax is payable whether the transaction occurs in Lagos, Lekki, or any other part of the country — provided that the gain arises from a Nigerian asset.

In the real estate context, the asset includes land, buildings, leasehold interests, and rights attached to immovable property. Thus, when you sell a plot of land, a duplex, or an apartment in Lekki at a profit, the gain derived from that transaction becomes subject to CGT.

Why Capital Gains Tax Matters in Lekki

Lekki is one of the most active and high-value real estate locations in Nigeria, hosting prime developments such as Lekki Phase 1, Chevron Drive, Osapa, Ikate, and beyond. Because of its strategic location and continuous infrastructure development — including the Lekki Deep Seaport, Dangote Refinery, and Lekki-Epe Expressway — property prices have appreciated dramatically in recent years.

A property purchased for ₦50 million five years ago may now sell for ₦150 million. The ₦100 million profit represents a capital gain, and under Nigerian law, a portion of that profit is taxable.

Understanding how this tax is calculated enables property owners and investors to plan financially, ensure compliance, and avoid unnecessary disputes with the Federal Inland Revenue Service (FIRS).

Legal Framework Regulating Capital Gains Tax in Nigeria

Capital Gains Tax is administered under the following legal instruments:

Capital Gains Tax Act, Cap C1, LFN 2004 (as amended)
Finance Acts (2019–2023) – which updated the scope and compliance framework.
Federal Inland Revenue Service (Establishment) Act, 2007
Personal Income Tax Act (where applicable to individuals)

The FIRS has the exclusive responsibility to assess, collect, and remit CGT on behalf of the Federal Government.

What Triggers Capital Gains Tax on Property Sales in Lekki?

The tax is triggered when there is a disposal of a chargeable asset. Disposal includes:

Sale or transfer of ownership
Exchange or gift of property
Compensation for loss of ownership
Lease exceeding 50 years
Transfer of interest through inheritance (in certain cases)

In essence, any transaction where ownership or a substantial interest in property changes hands can attract CGT, provided there is a gain.

The Standard Rate of Capital Gains Tax in Nigeria

The standard rate of Capital Gains Tax in Nigeria is 10% of the chargeable gain.
This means the tax is not based on the total sale price but on the profit realized after allowable deductions have been made.

Mathematically:

CGT = 10% × (Selling Price – Allowable Deductions – Purchase Cost)

Determining the Chargeable Gain: A Practical Breakdown

Let’s examine how the taxable amount (chargeable gain) is calculated.

Determine the Disposal Consideration (Selling Price):
The total amount received for the property, including money and any other valuable consideration.
Deduct the Cost of Acquisition:
The amount originally paid to purchase the property, including professional and legal fees at acquisition.
Deduct Incidental Costs of Disposal:
Expenses incurred to facilitate the sale, such as:
- Agency commission
- Legal fees
- Valuation fees
- Advertisement costs
- Survey or documentation charges
Apply the 10% Tax Rate:
The balance after deductions represents the “chargeable gain.” Multiply this by 10% to determine the tax payable.

Illustration: Sample CGT Calculation for a Property in Lekki

Scenario:
Mr. A bought a 5-bedroom duplex in Lekki Phase 1 in 2016 for ₦80 million.
In 2025, he sold the property for ₦200 million.
He incurred ₦5 million in agent commission and ₦2 million in legal and valuation fees during the sale.

Computation:

Description	Amount (₦)
Selling Price	200,000,000
Less: Purchase Cost	(80,000,000)
Less: Selling Expenses (agent, legal, etc.)	(7,000,000)
Chargeable Gain	113,000,000
Capital Gains Tax (10%)	₦11,300,000

Thus, Mr. A must remit ₦11.3 million to the Federal Inland Revenue Service as Capital Gains Tax.

Exemptions from Capital Gains Tax

While most property sales attract CGT, there are legal exemptions under the Capital Gains Tax Act. Common exemptions include:

Gains from sale of a single private residence occupied by the seller for at least three years.
Gains from compulsory acquisition of property by the government (if reinvested within 12 months).
Gains used to purchase another property within 12 months.
Charitable organizations using the property for public good.
Transfers between spouses or within a group of companies for restructuring.

In practice, many investors attempt to claim exemptions incorrectly, leading to audits. Professional advice is necessary to determine eligibility.

Payment and Filing Procedures for CGT in Lekki

The Federal Inland Revenue Service (FIRS) is responsible for collecting CGT. Payment must be made using the Remita platform to the appropriate FIRS tax office — typically, the one in charge of Lagos Mainland or Island jurisdiction.

The steps are as follows:

Obtain CGT computation and supporting documents.
Fill CGT Form 01 at FIRS office or online.
Generate a Remita Retrieval Reference (RRR).
Make payment through your bank or electronically.
Submit payment evidence and acknowledgment to FIRS for stamping.

Important:
For property sales requiring Governor’s Consent or registration, proof of CGT payment is mandatory before approval.

Timeline for Payment

The law requires that Capital Gains Tax be paid not later than the 30th day of January following the year of disposal. However, in property transactions, it is advisable to pay immediately after sale to facilitate title perfection.

Penalties for Non-Payment or Late Payment

Failure to pay CGT attracts the following consequences:

Interest and Penalty:
10% of the amount unpaid plus 15% interest per annum.
Delay in Title Registration:
Government agencies like the Lands Bureau may withhold Governor’s Consent until evidence of CGT payment is provided.
Legal Enforcement:
FIRS may issue assessment notices or institute recovery actions.
Reputational and Legal Risks:
For investors, failure to comply may affect corporate governance rating or lead to loss of property rights in severe cases.

Relationship Between Capital Gains Tax and Other Property Taxes

Many property owners confuse CGT with other land-related taxes in Lagos. Here is a quick distinction:

Tax Type	Purpose	Charged On	Payable To
Capital Gains Tax	Profit from sale of property	Seller’s gain	FIRS
Stamp Duties	Validation of legal instruments	Deed of Assignment	FIRS/LIRS
Registration Fees	Filing of documents	Buyer	Lands Registry
Ground Rent / Land Use Charge	Property occupation	Owner/Occupant	Lagos State Govt

Understanding these distinctions helps investors plan their budgets more efficiently.

Who Bears the Burden of Capital Gains Tax?

Legally, the seller bears the responsibility for paying Capital Gains Tax.
However, in practice, parties may negotiate differently. In some cases, developers or corporate vendors incorporate the tax into the sale price.

It is crucial that this responsibility be clearly stated in the Deed of Assignment or Sale Agreement, to avoid disputes later.

Treatment of Capital Gains Tax in Joint Ownership or Company Sales

Where a property is jointly owned, each co-owner is liable only for their proportionate share of the gain.

For companies, CGT applies to corporate bodies under the Companies Income Tax Act (CITA) in conjunction with the CGT Act. Corporate disposals must be properly documented and reflected in annual financial returns.

Deductions Allowed in Calculating Capital Gains

The Act permits deduction of “wholly, exclusively, and necessarily incurred” expenses. Common examples include:

Legal and professional fees at acquisition or disposal
Survey and valuation costs
Advertising and marketing costs
Stamp duties and registration fees paid at purchase
Agency or brokerage commissions

However, maintenance costs, insurance premiums, or interest on loans are not deductible.

The Impact of the Finance Act Amendments

The Finance Acts (2019–2023) have expanded the scope of CGT in Nigeria. Notable changes include:

Introduction of CGT on digital and share transactions (relevant for REITs and property investment funds).
Emphasis on withholding mechanisms for certain disposals.
Encouragement for voluntary disclosure through FIRS compliance programs.

These reforms aim to improve tax transparency and increase federal revenue.

How Valuation Affects CGT in Lekki

Property valuation is a critical step in determining fair market value, which directly influences the gain. FIRS often relies on professional valuers or estate surveyors to confirm the accuracy of declared selling prices.

If FIRS believes a sale price is below market value to evade tax, it may revalue the property and reassess CGT accordingly. Hence, sellers must maintain transparent records and professional valuations to avoid under-declaration penalties.

The Role of Lawyers in Managing CGT for Property Sales

A property lawyer’s expertise is indispensable in calculating, documenting, and remitting CGT. The lawyer ensures that:

Computations are correct and compliant.
Proper deductions are applied.
Payment is made promptly and receipts obtained.
Proof of payment is attached during Governor’s Consent application.
All legal documents (Deed of Assignment, Contract of Sale, etc.) reflect tax obligations clearly.

At Chaman Law Firm, our real estate lawyers guide clients through the process, ensuring both compliance and optimization — paying only what is due, and not a kobo more.

Case Study: Capital Gains Tax on Sale of Land in Lekki Phase 2

Background:
A client purchased two plots of land in Lekki Phase 2 in 2014 for ₦40 million each. In 2024, he sold both plots for ₦180 million total. He incurred ₦3 million in agent fees and ₦1 million in legal documentation.

Analysis:

Description	Amount (₦)
Sale Price	180,000,000
Less: Cost of Acquisition	(80,000,000)
Less: Disposal Costs (agent/legal)	(4,000,000)
Chargeable Gain	96,000,000
Capital Gains Tax (10%)	₦9,600,000

Action Taken:
Chaman Law Firm prepared the CGT computation, facilitated payment via Remita, and obtained the FIRS receipt required for Governor’s Consent.

Outcome:
The client’s Deed of Assignment was successfully processed, and title perfected without delay. He also received official tax clearance, confirming full compliance.

Common Pitfalls in CGT Compliance in Lekki

Under-declaration of sale value to reduce taxable gain
Failure to document allowable expenses for deductions
Ignoring payment deadlines, resulting in penalties
Incomplete tax clearance certificates delaying Governor’s Consent
Using unlicensed agents or consultants without legal backing

These pitfalls can be avoided through early engagement of qualified lawyers and tax professionals.

Interaction Between CGT and Governor’s Consent

In Lagos, before the Governor’s Consent is granted for property transfer, the buyer and seller must show evidence of payment of all applicable taxes, including:

Capital Gains Tax (CGT) — by the vendor
Stamp Duties — by the purchaser
Registration Fees — by the purchaser

Failure to provide these documents will automatically stall the consent process.

Implications for Foreign and Diaspora Investors in Lekki

Many Nigerians abroad invest in Lekki properties either for personal use or capital appreciation. When they eventually resell, they are still liable to CGT. However, with proper legal structuring, they can:

Deduct verifiable acquisition and disposal expenses paid abroad.
Appoint legal representatives in Nigeria to handle filing.
Claim exemptions for reinvested proceeds.

This is particularly relevant for diaspora investors who purchased off-plan or jointly owned estates.

Record-Keeping and Documentation Requirements

To compute CGT accurately, property owners should maintain:

Purchase receipts and payment proofs
Survey plans and title documents
Invoices for legal, agency, and advertisement fees
FIRS receipts and clearance certificates
Valuation reports

These records form the audit trail and are crucial during tax verification.

How to Reduce Capital Gains Tax Liability Legally

Here are professional strategies to manage your CGT exposure:

Track all allowable expenses: Maintain receipts and invoices.
Invest through corporate structures: Some corporate reorganizations are exempt.
Reinvest within 12 months: Gains reinvested in another property may be exempt.
Time your sale: Selling at a time of lower market appreciation can reduce gain.
Seek professional tax planning: Lawyers and tax experts can identify lawful deductions.

FAQs on Capital Gains Tax in Lekki

Q1. What is the rate of Capital Gains Tax in Nigeria?
The rate is 10% of the chargeable gain.

Q2. Who pays Capital Gains Tax — the buyer or seller?
The seller is responsible for paying CGT unless otherwise agreed in writing.

Q3. How do I calculate my CGT?
Subtract the acquisition cost and allowable expenses from the sale price. Multiply the remainder by 10%.

Q4. Is CGT applicable on inherited property?
Yes, if the inheritor later sells the property and realizes a gain.

Q5. Can I avoid CGT legally?
You can’t avoid it entirely, but you can minimize it through exemptions and reinvestment strategies.

Q6. Is payment of CGT required before Governor’s Consent?
Yes. Evidence of payment is mandatory before approval.

Q7. What is the penalty for non-payment?
10% penalty and 15% annual interest on unpaid tax.

Q8. Can foreigners or diaspora Nigerians pay CGT from abroad?
Yes, via electronic Remita payment through their Nigerian tax representative.

Q9. Does CGT apply to property gifted to family members?
Yes, unless specifically exempt under the Act, because a gift constitutes a “disposal.”

Q10. Is land flipping taxable?
Yes. Quick resale or flipping for profit is subject to CGT, even if done within months.

Conclusion

Capital Gains Tax is more than just a fiscal obligation — it is a legal requirement that protects property transactions and validates ownership transfer. In Lekki’s dynamic real estate market, where properties appreciate rapidly, ignorance of CGT laws can lead to hefty penalties or delay in title perfection.

The key to managing this process effectively lies in accurate calculation, prompt payment, and professional documentation. Whether you are a developer, investor, or individual seller, engaging an experienced property lawyer ensures that your transaction is compliant, efficient, and financially optimized.

At Chaman Law Firm, we specialize in guiding clients through every stage of property sale — from due diligence and documentation to Governor’s Consent and Capital Gains Tax remittance. Our team ensures your transaction meets both legal and fiscal requirements, giving you peace of mind and protecting your investment.

📍 Contact Us Today

📞 0806 555 3671, 08096888818, 08024200080📧 chamanlawfirm@gmail.com📍 Chaman Law Firm 115, Obafemi Awolowo Way, Allen Junction, Beside Lagos Airport Hotel, Ikeja, Lagos🌐 www.chamanlawfirm.com👉 Book a consultation now: www.chamanlawfirm.com/book-consultation

Secure your property sale and stay compliant with Nigerian tax laws.
At Chaman Law Firm, your property — and peace of mind — come first.

How Is Capital Gains Tax Calculated on Property Sales in Lekki?

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