RE-EXAMINING THE CHARGEABLE GAINS ON CAPITAL GAINS TAX IN NIGERIA: FINANCE ACT 2021 IN PERSPECTIVE

Abstract

Tax is a compulsory levy imposed by the government on the incomes of tax payers in order to pay the expensesof governance. Capital gains tax is the taxation levied on capital gains. A capital gain is the excess of the salesproceeds of asset such as building, land, stocks, bonds and qualifying machinery and equipment etc. over theoriginal cost of that asset. Capital gains tax is a gain accruing from increase in the market value of assets to aperson who does not habitually offer such item for sale and in whose hands they do not constitute stock in trade.The gain here, may be realized where the assets are sold or disposed of or proper gain where the assetsappreciate in value while still in hands of the owner. Capital gains tax is chargeable at the rate of 10%. Withthe effect from the 1st January, 1998, stocks and shares ceased to be chargeable gains. Subsequently, theFinance Act of 2021, which took effect on 1st January, 2022, amended the Capital Gains Tax Act andreintroduced tax on stocks and shares as chargeable gains. The reintroduction of capital gains tax on sharetransactions, will affect the pricing conditions and the tax provisions in the sale and purchase agreement. Thispaper will re-examine the nature of capital gains, the effect of reintroduction of taxation on gains of stocks andshares and also, considers the tax treatment of shares and stocks in some selected jurisdictions. This paperrecommends more sensitization on capital gains tax regime in Nigeria and the need to strengthen theadministration of CGT to avoid revenue leakages.