A Step-by-Step Guide to Capital Gains Tax on Lagos Property Sales
Introduction
Selling property in Lagos—whether it’s a residential building, a parcel of land, or a commercial complex—can be an exciting and profitable venture. However, many property owners overlook one crucial legal and financial obligation attached to such transactions: Capital Gains Tax (CGT). The Capital Gains Tax applies to profits made when you sell or transfer an asset for more than its original purchase price. In Lagos, as across Nigeria, this tax is enforced under federal law and plays a vital role in ensuring fiscal responsibility and proper documentation of property transactions.
This comprehensive guide explains, in simple and practical terms, everything you need to know about Capital Gains Tax on property sales in Lagos. It provides a step-by-step breakdown—from understanding the law and calculating the tax to filing, payment, and compliance strategies for both local and diaspora investors. By the end of this article, you will understand how to stay compliant, avoid penalties, and legally protect your property sale profits.
Understanding Capital Gains Tax (CGT)
Capital Gains Tax (CGT) is a tax imposed on the profit or gain realized when an asset is sold or transferred at a higher price than it was originally acquired. In Nigeria, CGT is governed by the Capital Gains Tax Act, Cap C1 Laws of the Federation of Nigeria 2004 (as amended) and administered by the Federal Inland Revenue Service (FIRS).
This tax applies to individuals, companies, trustees, and partnerships that dispose of chargeable assets. Real estate—particularly land and buildings located in Nigeria—is one of the most significant chargeable assets under the law.
In simple terms, if you bought a property in Lekki for ₦50 million and later sold it for ₦70 million, your gain is ₦20 million. The CGT payable would be calculated on that ₦20 million gain, not on the total sale price.
Legal Framework for Capital Gains Tax in Nigeria
The primary legislation governing CGT in Nigeria is the Capital Gains Tax Act, as modified by several Finance Acts (2019–2023). The relevant sections include:
Section 2: Imposes tax on chargeable gains from the disposal of assets.
Section 3: Specifies chargeable assets including land and buildings.
Section 4: States exemptions.
Section 5–7: Provide computation formulas for determining chargeable gains.
Section 9: Establishes that CGT is payable at a flat rate of 10% of the chargeable gain.
Section 12: Provides for allowable deductions such as cost of acquisition, improvement, and incidental expenses.
Over the years, amendments under the Finance Acts have clarified certain exemptions, payment procedures, and filing obligations to improve compliance.
Why Capital Gains Tax Matters in Lagos Property Transactions
Lagos is the epicenter of Nigeria’s property market, where land and real estate values appreciate rapidly. Because of this, most property transactions in Lagos involve significant gains. The Federal Inland Revenue Service (FIRS) and the Lagos State Internal Revenue Service (LIRS) closely monitor such transactions for compliance.
Payment of CGT is essential because:
It legitimizes the sale and serves as part of the Governor’s Consent documentation.
It is a mandatory requirement for registering the transfer of title at the Lagos Land Registry.
It provides legal proof that the seller’s profit has been duly taxed.
It ensures the buyer’s title is clean and transferable in future dealings.
Ignoring CGT obligations can delay title perfection and attract penalties or legal disputes during property verification.
When Is Capital Gains Tax Payable?
Capital Gains Tax becomes payable when there is a “disposal” of a property, which includes:
Sale of land or building.
Transfer of ownership through gift, exchange, or assignment.
Compulsory acquisition by government.
Disposal under court order or trust.
The liability arises at the point of transfer, not when payment is received. The tax must be remitted within the same year of assessment when the disposal occurs.
Who Is Responsible for Paying Capital Gains Tax?
The responsibility to pay CGT lies primarily with the person making the gain, which is usually the seller or assignor of the property. However, in practice, both parties (buyer and seller) play roles in ensuring compliance.
Seller’s Role: Compute and remit CGT before submitting documents for Governor’s Consent.
Buyer’s Role: Ensure the seller has paid CGT to avoid future disputes or rejection during title registration.
In transactions handled by lawyers, it is common for the buyer’s solicitor to retain the CGT portion from the purchase price and remit it on behalf of the seller before title perfection.
Step-by-Step Guide to Paying Capital Gains Tax on Property Sales in Lagos
Step 1: Determine the Chargeable Gain
The chargeable gain is the difference between the sale price and the allowable deductions.
The formula is:
Chargeable Gain = Disposal Proceeds – (Cost of Acquisition + Cost of Improvement + Incidental Costs of Disposal)
Example:
Sale price: ₦80,000,000
Cost of purchase: ₦50,000,000
Legal fees & agency fees: ₦3,000,000
Renovation cost: ₦2,000,000
Chargeable Gain = 80,000,000 – (50,000,000 + 3,000,000 + 2,000,000) = ₦25,000,000
The Capital Gains Tax will be 10% of ₦25,000,000 = ₦2,500,000.
Step 2: Prepare Necessary Documents
Before filing, you must gather all relevant documentation:
Copy of the Deed of Assignment/Conveyance showing sale transaction.
Receipts or evidence of payment for the purchase and improvements.
Seller’s Tax Identification Number (TIN).
Letter of Application to the FIRS requesting computation and assessment.
Valuation report (if applicable).
These documents will be submitted to FIRS for assessment of the payable tax.
Step 3: File with the Federal Inland Revenue Service (FIRS)
The next step is to file your CGT computation with FIRS. You can do this by visiting the FIRS office in your jurisdiction (for Lagos, typically the LIRS/FIRS Integrated Tax Office near the property location).
FIRS officials will review your computation and issue an Assessment Notice showing the CGT payable. The amount must be paid using the official Remita platform or designated bank.
Step 4: Make Payment
After receiving the assessment notice, proceed to pay via Remita or at an approved bank. Payment details include:
Tax Type: Capital Gains Tax
Tax Authority: Federal Inland Revenue Service
Description: CGT on Disposal of Property in Lagos
Reference: TIN of the Seller
After payment, you’ll receive an Electronic Payment Receipt (e-TCC) or stamped bank teller as proof.
Step 5: Obtain Evidence of Payment (CGT Clearance)
Upon confirmation of payment, FIRS will issue a CGT Clearance Certificate or Tax Receipt confirming that the Capital Gains Tax has been paid for the transaction. This document is mandatory before any property document can be submitted for Governor’s Consent or registered at the Land Registry.
Keep this certificate in your property file; it serves as permanent proof of compliance.
Step 6: Attach to Governor’s Consent Application
For property transactions in Lagos, the CGT receipt must be attached to your Governor’s Consent application file at the Lagos State Lands Bureau.
Other supporting documents usually include:
Stamp Duty Receipt.
Consent Fees.
Charting Fees.
Land Use Charge Clearance.
Without the CGT receipt, your application will not be processed or approved.
Step 7: Keep Record for Future Transactions
Maintaining records of your CGT payments ensures smooth future transactions. When reselling the same property, these documents will confirm that past obligations have been settled.
How to Compute and File Capital Gains Tax for Diaspora Investors
Many Nigerians in the diaspora invest in Lagos real estate through agents or developers but often fail to remit taxes after selling their assets. For non-resident property owners, compliance is still mandatory.
Diaspora investors can:
Authorize a local lawyer through a Power of Attorney to act on their behalf.
Submit transaction documents electronically to the appointed lawyer or tax agent.
Remit payment via online channels through Nigerian banks.
Receive their CGT clearance certificate remotely.
This ensures that their property sales remain compliant even while abroad.
Exemptions Under the Capital Gains Tax Act
Certain disposals are exempted from CGT under Section 26 of the Act. These include:
Owner-occupied residences: If you sell your primary home and use the proceeds to buy another within 12 months.
Gifts to charities or approved institutions.
Transfers between spouses.
Compensation for loss of employment (not exceeding ₦10 million).
Assets used for agriculture and rural development (subject to approval).
However, exemptions must be properly documented and applied for through the FIRS to avoid disputes.
Penalties for Non-Payment or Late Payment
Failure to pay or late payment of CGT attracts penalties and interest under the Federal Inland Revenue Service (Establishment) Act and the Capital Gains Tax Act.
Late filing penalty: ₦25,000 in the first month and ₦5,000 for each subsequent month.
Interest on unpaid tax: Charged at the Central Bank of Nigeria’s prevailing interest rate.
Refusal to issue consent or title registration: The Lands Bureau will not process transfers until CGT is settled.
Legal action: Persistent defaulters may face recovery actions or court proceedings.
Case Study: A Real-Life Lagos Property Sale
Mr. Adewale, a real estate investor, purchased a plot of land in Ajah in 2015 for ₦15 million. In 2024, he sold it for ₦45 million. The buyer’s lawyer requested evidence of Capital Gains Tax payment as part of the title perfection process.
FIRS assessed the chargeable gain as ₦30 million and CGT payable at ₦3 million. Mr. Adewale initially ignored it, thinking it was optional. When he later applied for Governor’s Consent, his file was rejected until he produced the CGT receipt. He had to pay ₦3 million plus ₦150,000 in penalties and additional administrative costs before his transaction could proceed.
This case highlights how neglecting CGT obligations can delay property documentation and increase costs unnecessarily.
Common Mistakes to Avoid
Assuming CGT is optional. It is a legal obligation under Nigerian law.
Relying on unverified agents. Always ensure your tax remittance goes directly to FIRS.
Failing to collect receipts. Verbal confirmations are not valid proof of payment.
Ignoring capital improvement records. Without receipts, you cannot claim deductions.
Overstating property cost. This can trigger investigations by FIRS.
Frequently Asked Questions (FAQs)
1. What is the current rate of Capital Gains Tax in Nigeria?
It is 10% of the chargeable gain, irrespective of the property’s value.
2. Who pays CGT on property sales—the buyer or seller?
The seller (assignor) pays CGT, but the buyer must verify payment before completing the transaction.
3. Can CGT be paid after the Governor’s Consent?
No. It must be paid before applying for the Governor’s Consent.
4. How long does it take to get the CGT receipt?
Usually within 7–14 working days, depending on FIRS processing speed.
5. Is there a penalty for under-declaring sales price?
Yes. FIRS may revalue the property and impose penalties for false declaration.
6. What if I sold my property at a loss?
If there is no gain, CGT does not apply. However, you must still declare the transaction.
7. Can I file CGT online?
Yes. You can use the Remita or FIRS online portal for filing and payment.
Capital Gains Tax vs. Other Property Taxes
It’s important not to confuse CGT with other property-related taxes in Lagos:
Land Use Charge (LUC): An annual tax on property ownership.
Stamp Duty: Payable on the execution of legal documents.
Consent Fee: Payable to obtain the Governor’s Consent.
Registration Fee: Paid for recording documents at the Lands Registry.
Capital Gains Tax specifically applies to profits made from sale or disposal of property, while others relate to ownership or documentation.
Professional Tips for Property Sellers
Always engage a property lawyer before finalizing sales.
Keep accurate financial records of your property acquisition and improvement.
Pay your CGT early to avoid penalties or delays.
Ensure your buyer’s solicitor verifies tax compliance before completion.
Use trusted property management firms like Chaman Properties for documentation support.
Why You Should Consult a Property Lawyer
Capital Gains Tax involves both legal and financial elements. A property lawyer can:
Advise on whether your sale qualifies for exemption.
Help compute allowable deductions to minimize tax liability.
Liaise with FIRS for accurate assessment.
Handle filing, payment, and documentation.
Ensure your property transfer complies with all Lagos and federal laws.
At Chaman Law Firm, we specialize in helping clients navigate complex real estate transactions—from tax compliance to title perfection and dispute resolution.
For Diaspora Investors: How to Stay Tax-Compliant from Abroad
If you live abroad and own property in Lagos, you can still remain compliant through:
Appointing a local legal representative via Power of Attorney.
Requesting digital copies of assessment notices and receipts.
Paying through online banking channels using Remita or FIRS-approved methods.
Regularly reviewing your property tax obligations with your lawyer.
This ensures your property remains in good legal standing and free from encumbrances.
Economic Importance of Capital Gains Tax
CGT is more than a revenue source—it contributes to Nigeria’s fiscal growth, encourages proper record keeping, and supports transparency in property transactions. By paying CGT, you:
Help government finance infrastructure.
Prevent money laundering in property sales.
Enhance market credibility for real estate investments.
Strengthen legal ownership integrity.
Conclusion
Capital Gains Tax is a critical aspect of property sales in Lagos that every investor, homeowner, or developer must understand. It’s not merely a government requirement—it’s a legal confirmation that your property transaction is legitimate and complete. Ignoring it can lead to delays, penalties, or outright rejection of your Governor’s Consent application.
Whether you’re selling a plot in Lekki, a duplex in Ikeja, or an apartment in Ikoyi, ensure your Capital Gains Tax is computed and remitted correctly. Compliance not only protects your investment but also ensures peace of mind during and after the transaction.
Call to Action
Are you planning to sell your property in Lagos or perfect your title documents? Don’t take chances with tax compliance. Let experienced professionals handle it for you.
At Chaman Law Firm, we assist clients in computing, filing, and paying Capital Gains Tax accurately and efficiently. We also provide full legal support for Governor’s Consent, Deeds of Assignment, Stamp Duty, and Title Registration.