CAPITAL GAINS TAX ACT CAP.42 L.F.N. 1990 ACT CAP. C1 L.F.N. 2004

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CAPITAL GAINS TAX ACT CAP.42 L.F.N. 1990 ACT CAP. C1 L.F.N. 2004

AMENDMENTS: Finance (Miscellaneous Taxation Provisions) Decree No. 30 1996
FINANCE (MISCELLANEOUS) TAXATION (AMENDMENT) DECREE NO. 3 1993
FINANCE (MISCELLANEOUS TAXATION PROVISIONS) DECREE No. 18 1998
Investments and Securities Decree No. 45 1999
FINANCE (MISCELLANEOUS TAXATION PROVISIONS) DECREE (NO. 2) No. 19 1998

ARRANGEMENT OF SECTIONS

Section

1. Taxation of capital gains.
2. Capital gains tax.
3. Chargeable assets.

4. Assets situated outside Nigeria.

5. Exclusion of losses.

6. Disclose of assets.

7. Disposal if assets: provision as to considerations.
8. Death.
9. Compulsory acquisition of land.
10. Disposal of land effected indirectly.
11. date of acquisition or disposal, etc.
12. Computation of capital gains.
13. Exclusion from consideration for disposal of sums chargeable to income tax.
14. General provision as to allowable expenditure.
15. Exclusion of expenditure deductible for income tax purposes.
16. Special provisions as to deductions allowable: insurance premiums.

17. Part disposal.

18. Consideration due after time of disposal.

19. Assets lost or destroyed.

20. Bargains comprising two or more transactions.
21. Artificial or fictitious transactions.
22. Valuation: market value.
23. Transactions between connected persons.
24. Meaning of "connected persons".

25. Location of assets.

26. Supplemental.
27. Exemption for charities, etc.
28. Statutory bodies, etc.
29. Retirement benefits schemes.
30. Decorations.
31. Stocks and shares, etc.
32. Replacement of business assets.
33. Life assurance policies.
34. Rights under policies of insurance, other than life assurance policies.
35. Personal injury.
36. Principal private residences.
37. Chattels sold for 1,000 or less in a year>
38. Motorcars.
39. Gifts.
40. Diplomatic representatives etc.

41. Double taxation relief.
42. Relief in respect of delayed remittances of gains.
43. Application of income tax administration provisions.
44. Information as to assets required.
45. Interpretation and other supplemental provisions.
46. Short title.

SCHEDULE PROVISION OF THE INCOME TAX ACTS APPLIED TO CAPITAL GAINS TAX CHAPTER 42

CAPITAL GAINS TAX ACT

1967 No.44

 

An Act to provide for the taxation of capital gains accruing on disposal of assets.

 

 

 

Commencement. [1st April, 1967]

CAPITAL GAINS TAX-GENERAL

 

 

 

Taxation of capital gains.

Cap. P8.

 

1. (1) Subject to the provisions of this Act there shall be charged a tax to be called capital gains tax for the year of assessment 1967-68 and for subsequent years assessment in respect of any capital gains, that is to say, gains accruing to any person on or after 1st April, 1967 on a disposal of assets.

(2) Every such gain shall, except so far as otherwise expressly provided, be a chargeable gain.

(3) In this Act, unless the context otherwise requires, any reference to a person shall include a reference to any person to whom section 2 of the Personal Income Tax Act applies.

 

Capital gains tax.

 

2. (1) The rate of capital gains tax shall be twenty percent.

(2) Capital gains tax shall be chargeable at the rate mentioned in subsection (1) of this section on the total amount of chargeable gains accruing to any person in a year of assessment after making such deductions as may be allowed under this Act in the computation of such gains.

(3) Capital gains tax to be assessed on any person under this Act shall be computed and charged in accordance with the provisions of this Act.

 

 

 

Chargeable assets

 

3. Subject to any exceptions provided by this Act, all forms of property shall be assets for the purposes of this Act whether situated in Nigeria or not, including-

(a) options, debts and incorporeal property generally;

(b) any currency other than Nigerian; and

(c) any form of property created by the person disposing of it, or otherwise coming to be owned without being acquired;

 Cap. P8 Cap. C21 Cap. P13

 

and without prejudice to the foregoing provisions, this section shall have effect, notwithstanding that the property is an asset in respect of which qualifying expenditure had been incurred under the Schedule to the Personal Income Tax Act, the third schedule  to the Companies Income Tax Act or the Petroleum Profits Tax Act.

section 3 (d) repealed by section 263 (2)(a) Investments and Securities Decree No. 45 1999 1965 No.8

 

(d) stocks and shares of every description, and with prejudice to the foregoing provisions, this section shall have effect, notwithstanding that-

(i) the property is an eligible property within the meaning of the Income Tax (Rents) Act 1965 or the Act repealed by that Act, or
(ii) the property is an asset in respect of which qualifying expenditure had been incurred under Capital gains tax.

 

Assets situated outside Nigeria.[Cap. C21.]

 

4. Without prejudice to the foregoing provisions of this Assets Act, as respects any chargeable gains accruing in the year 1967-67 or a late year of assessment from a disposal of assets situated outside Nigeria-

(a) Where the disposal of assets is by an individual-

(i) who is in Nigeria for some temporary purpose only and not with any view or intent to establish his residence in Nigeria, and

(ii) if the period of sum of the periods for which he is present in Nigeria in that year of assessment exceeds 182 days; or
(b) where the disposal is by any trustee of any trust or settlement and the seat of administration of the trust or settlement is situated outside Nigeria during the whole of that year of assessment; or

(c) where the disposal is by a company, which is not a Nigerian company within the meaning of section 105 of the Companies Income Tax Act, that is to say, a company whose activities are managed and controlled outside Nigeria during the whole of that year of assessment, capital gains tax shall be charged on the amounts (if any) received or brought into Nigeria
in respect of any chargeable gains, such amounts being treated as gains accruing when they are received or brought into Nigeria.
 

5.    Exclusion of losses

In the computation of chargeable gains under this Act the amount of any loss which accrues to a person on a disposal of any asset shall not be deductible from gains accruing to any persons on a disposal of such asset.

GAINS CHARGEABLE TO TAX

6.    Disposal of assets

(1) Subject to any exceptions provided by this Act there is, for the purposes of this Act, a disposal of assets by a person where any capital sum is derived from a sale, lease, transfer, an assignment, a compulsory acquisition or any other disposition of assets, notwithstanding that no asset is acquired by the person paying the capital sum, and in particular–

(a)      where any capital sum is derived by way of compensation for any loss of office or employment;

(b)      where any capital sum is received under a policy of insurance and the risk of any kind of damage or injury to, or the loss or depreciation of, assets;

(c)      where any capital sum is received in return for forfeiture or surrender of rights, or for refraining from exercising rights;

(d)      where any capital sum is received as consideration for use or exploitation of any asset; and

(e)      without prejudice to paragraph (a) of this section, where any capital sum is received in connection with or arises by virtue of any trade, business, profession or vocation.

(2) In this section and elsewhere in this Act –

(a)      “capital sum” means any money or money’s worth which is not excluded from the consideration taken into account in the computation under section 11 of this Act; and

(b)      references to a disposal of assets include, except where the context otherwise requires, references to a part disposal of assets, and there is a part disposal of assets–

(i)                  where an interest or right in or over the assets is created by the disposal, as well as where it subsists before the disposal, and

(ii)                where, on a person making a disposal, any description of property derived from the assets remains undisposed of.

7.    Disposal of assets; provisions as to considerations

(1) Subject to the provisions of this Act, a person’s acquisition of an asset and the disposal of it to him shall, for the purposes of this Act, be deemed to be for a consideration equal to the market value of the asset–

(a)      where he acquires the asset otherwise than by way of a bargain made at arm’s length; or

(b)      where he acquires the asset wholly or partly for a consideration that cannot be valued, or in connection with his own or another’s loss of office or employment or diminution of emolument, or otherwise in consideration for or recognition of his or another’s services or past services in any office or employment or of any other service rendered or to be rendered by him or another; or

(c)   where he acquires the asset as trustee for creditors of the person

       making the disposal.

(2) Where a person disposes by way of a gift of an asset acquired by him by way of a gift or otherwise (not being an acquisition on a devolution on death) the person acquiring the asset on that disposal shall, for all purposes of this Act, so far as relates to the interest taken by him, be deemed to have acquired the asset–

(a)      in a case where the amount of the consideration for which the asset was last disposed of by way of a bargain made at arm’s length is ascertainable, for a consideration equal to that amount; and

(b)      in any other case, for a consideration equal to the market value of the asset on the date of that disposal;

and in this subsection “gift” does not include a donatio mortis causa.

(3) In relation to any asset held by a person as nominee for another person, or as trustee for another person absolutely entitled as against the trustee, or for any person who would be so entitled but for being an infant or other person under disability (or for two or more persons who are or would be jointly so entitled), this Act shall apply as if the property were vested in, and the acts of the nominee or trustee in relation to the asset were the acts of, the person or persons for whom he is the nominee or trustee (acquisitions from or disposals to him by that person or persons being disregarded accordingly).

(4) The conveyance or transfer by way of security of an asset or of an interest or right in or over it, or transfer of a subsisting interest or right by way of security in or over an asset (including a re-transfer on redemption of the security), shall not be treated for the purposes of this Act as involving any acquisition or disposal of the asset.

(5) Where a person entitled to an asset by way of security or to the benefit of a charge or incumberance on an asset deals with the asset for the purpose of enforcing or giving effect to the security, charge or incumbrance his dealings with it shall be treated for the purpose of this Act as if they were done through him as nominee by the person entitled to it subject to the security, charge or incumberance; and this subsection shall apply to the dealings of any person appointed to enforce or give effect to the security, charge or incumberance as receiver and manager or judicial factor as it applies to the dealings of the person entitled as aforesaid.

(6) An asset shall be treated as having been acquired free of any interest or right by way of security subsisting at the time of any acquisition of it, and as being disposed of free of any such interest or right subsisting at the time of the disposal; and where an asset is acquired subject to any such interest or right the full amount of the liability thereby assumed by the person acquiring the asset shall form part of the consideration for the acquisition and disposal in addition to any other consideration.

(7) Where an asset is acquired by a creditor in satisfaction of his debt or part thereof, the asset shall not be treated as disposed of by the debtor or acquired by the creditor for a consideration greater than its market value at the time of the creditor’s acquisition of it, and if a chargeable gain accrues to the creditor on a disposal by him of the asset the amount of the chargeable gain (where necessary) shall be reduced so as not exceed the chargeable gain which would have accrued if he had acquired the property for a consideration equal to the amount of the debt or that part thereof.

8.    Death

(1) On the death of an individual any assets of which he was competent to dispose of shall for the purposes of this Act be deemed to be disposed of by him at the date of his death and acquired by the personal representatives or other person on whom the assets devolve for a consideration equal to–

(a)      in a case where the amount of the consideration for which the asset was last disposed of by way of a bargain made at arm’s length is ascertainable, that amount; and

(b)      in any other case, the market value of the asset at that date.

(2) The gains which accrue in consequence of subsection (1) of this section shall not be chargeable to capital gains tax under this Act.

(3) In relation to property forming part of the estate of a deceased person the personal representatives shall for the purposes of this Act be treated as being a single and continuous body of persons (distinct from the persons who may from time to time be the personal representatives), and the body shall be treated as having the deceased’s residence and domicile at the date of death.

(4) On a person acquiring any asset as legatee–

(a)      no chargeable gain shall accrue to the personal representatives; and

(b)      the legatee shall be treated as if the personal representatives’ acquisition of the asset had been his acquisition of it.

(5) In this section references to assets of which a deceased person was competent to dispose of are references to assets of the deceased which (otherwise than in right of a power of appointment) he could, if of full age and capacity, have disposed of by his will assuming that all the assets were situated in Nigeria and, if he was not domiciled in Nigeria, that he was domiciled in Nigeria.

(6) If not more than two years after a death any of the dispositions of the property of which the deceased was competent to dispose of whether by will, or under the law relating to intestacies, or otherwise, are varied by deed of family arrangement or similar instrument, this section shall apply as if the variations made by the deed or other instrument were effected by the deceased, and no disposition made by the deed or other instrument shall constitute a disposition for the purposes of this Act.

(7) In this section–

“legatee” includes any person taking under a testamentary disposition or on an intestacy or partial intestacy whether he takes beneficially or as trustee, and a donatio mortis causa shall be treated as a testamentary disposition and not as a gift;

“personal representatives” means–

(a)      the executor, original or by representation or administrator for the time being of a deceased person under any law in force in Nigeria;

(b)      persons having in relation to the deceased under the law of another country any functions corresponding to the functions for administration purposes under any law in force in Nigeria or personal representatives as defined under paragraph (a) of this subsection,

and references to personal representatives as such shall be construed as references to the personal representatives in their capacity as having such functions as aforesaid.

9.    Compulsory acquisition of land

(1) A person shall not be chargeable to tax under this Act in respect of any acquisition and the disposal of land by compulsory powers, if that person had not–

(a)      acquired the land at a time when he knew or might reasonably have known that it was likely to be acquired by the authority; or

(b)      taken any steps by advertisement or otherwise to dispose of the land or to make his willingness to dispose of it known to the authority or others.

Cap. L5

(2)    In this section “authority exercising or having compulsory powers” means, in relation to any disposal of land, an authority, a person or body of persons acquiring the land compulsorily under the Land Use Act, or  any other enactment, or law of a country other than Nigeria, or who has or have been, or could be, authorised to acquire it compulsorily for the purposes for which it is acquired, or for whom another authority, person or body of persons has or have been, or could be, authorised so to acquire it.

 

10.  Date of acquisition or disposal, etc

For the purposes of this Act any asset acquired or disposed of by any person chargeable to capital gains tax shall subject to section 23 (4) of this Act be deemed to have been so acquired or disposed of at the date at which there is an enforceable right to acquire or a binding duty to dispose of the asset or any right or interest therein, and in particular–

(a)      where any contract is to be performed subject to any condition the date of acquisition or disposal of asset shall be deemed to be the date when the condition is satisfied, but where a consideration of such a contract does not depend solely or mainly on the value of the asset at the time the condition is satisfied, the acquisition or disposal shall be treated as if the contract had never been conditional, in which case the date of the acquisition or disposal of asset shall be the date of the contract;

(b)      where an option is conferred by virtue of any contract, the date of the acquisition or disposal of asset shall be the date when the option is exercised.

CAPITAL GAINS: COMPUTATION

11.  Computation of capital gains

In the computation of any chargeable gains under this Act, such gains as may be chargeable to tax shall, subject to the provisions of this Act, be the difference between the consideration accruing to any person on a disposal of assets and any sum to be excluded from that consideration, and there shall be added to that sum the amount of the value of any expenditure allowable to such person on such disposal by virtue of this Act.

12.  Exclusion from consideration for disposals of sums chargeable to income tax

Cap. P8, C21, P13

(1) There shall be excluded from the consideration for a disposal of assets taken into account in the computation of the gain accruing on that disposal any   money or money’s worth charged to income tax as income of, or taken into account as a receipt in computing income or profits or gains or losses of the person making the disposal for the purposes of the Personal Income tax  Act, the Company’s Income Tax Act or the Petroleum Profits Tax Act, which Acts are hereafter jointly referred to as “the Income Tax Acts”.

(2) Subsection (1) above shall not be taken as excluding from the consideration for the disposal of an asset any money or money’s worth which is  taken into account in the making of a balancing charge under the Income Tax Acts.

13.  General provision as to allowable expenditure

(1) In the computation of capital gains the sums allowable as a deduction from the consideration accruing to a person on the disposal of an asset shall be restricted to –