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 expenses of governance. Capital gains tax is the taxation levied on capital gains. A capital gain is the excess of the sales proceeds of asset such as building, land, stocks, bonds and qualifying machinery and equipment etc. over the original cost of that asset. Capital gains tax is a gain accruing from increase in the market value of assets to a person 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 assets appreciate in value while still in hands of the owner. Capital gains tax is chargeable at the rate of 10%. With the effect from the 1st January, 1998, stocks and shares ceased to be chargeable gains. Subsequently, the Finance Act of 2021, which took effect on 1st January, 2022, amended the Capital Gains Tax Act and reintroduced tax on stocks and shares as chargeable gains. The reintroduction of capital gains tax on share transactions, will affect the pricing conditions and the tax provisions in the sale and purchase agreement. This paper will re-examine the nature of capital gains, the effect of reintroduction of taxation on gains of stocks and shares and also, considers the tax treatment of shares and stocks in some selected jurisdictions. This paper recommends more sensitization on capital gains tax regime in Nigeria and the need to strengthen the administration of CGT to avoid revenue leakages.