overview of Transaction Taxes in Nigeria.pptx

T r a n s a c t i o n Ta x e s -
TRANSACTION TAXES IN NIGERIA
1
NAVIGATING THE PRACTICAL ISSUES
24TH
APRIL 2025

OUTLINE
2
Value Added Tax (VAT) Act
Withholding Tax (WHT) Act
Stamp Duties Act
Capital Gain Tax (CGT) Act

ValueAddedTax(VAT)
3
 VAT is a consumption tax which is to be levied on all
goods and services, other than those exempted
under the VAT Act.
 It is collected at each stage of the production and
distribution process by authorized persons .
 It is eventually borne by the final consumer, (however
sometimes multiple layers do bear part of the burden
e.g. VAT on tax on services and fixed assets).
 Standard rate of tax is 7.5% of invoice value of goods
and services.
 It is administered by the Federal Inland Revenue
Service (FIRS).
NATURE OF VALUE ADDED TAX (VAT):
 Indirect Tax:
a) VAT is not paid directly by the consumer to the
government.
b) It is collected by businesses on behalf of the
government.
c) The final consumer bears the tax cost as it is
embedded in the price of goods and services.

NATURE OF VALUE ADDED TAX (VAT) CONT’D
4
 Multi-Stage Tax System
a) VAT is applied at each stage of the production and
distribution chain:
b) Manufacturer → Wholesaler → Retailer → Final
Consumer
c) Each entity in the supply chain charges VAT on its sales
(output VAT) and deducts the VAT it paid on its purchases
(input VAT).
 Input & Output VAT
a) Output VAT: The VAT charged on goods or services sold to
customers.
b) Input VAT: The VAT a business pays on goods or services
it purchases from others.
c) Businesses remit the net VAT to the government:
Net VAT = Output VAT – Input VAT ,If Input VAT is
higher, the business may carry it forward or request a
refund (subject to FIRS guidelines).
 Standard VAT Rate
The standard VAT rate in Nigeria is 7.5% (effective from
February 1, 2020).
Charged on all VATable goods and services unless
exempted or zero-rated.

5
GoingSpecific-VAT
VATable Goods and Services:
Examples of VATable items:
 Consulting services
 Electronics, furniture, clothes, and processed foods
Exemptions include:
Basic Food Items - The terms “basic food items” as
used in the VAT exemption list has now been given a
definite and expanded meaning. Food items that qualify
as basic food items are generally agro and aqua based
staple food that are in raw and semi finished forms.
 Educational materials
 Baby products
 Medical services and pharmaceuticals
Penalties for Non-Compliance:
Failure to file returns: 50,000 for the first month,
₦
25,000 for each subsequent month.
₦
Failure to remit: Interest and penalties apply under FIRS
rules

 Withholding Tax (WHT) is a tax deduction at
source from certain payments made to
individuals, companies, or other entities.
 It serves as an advance payment of income tax
and is creditable against the final tax liability.
Purpose of WHT
 To curb tax evasion by collecting tax upfront.
 To improve cash flow for the government.
 To bring more taxpayers into the net,
especially informal sector operators who may
not file returns voluntarily.
6
WITHHOLDING TAX (WHT)
Governed
under:
Regulated by:
Applicability:
• Companies Income Tax Act
(CITA) – for companies.
• Personal Income Tax Act
(PITA) – for individuals.
• Federal Inland Revenue
Service (FIRS) for corporate
entities and federal matters.
• State Internal Revenue
Services (SIRS) for individuals
and unincorporated business
•Applies to specified types of payments
such as rent, interest, dividends,
consultancy, construction,
commissions, etc.
•Does not apply to goods purchased in
ordinary course of business, except
under special conditions.

The Process:
oWhen a business or individual makes a payment
to another for specified services or transactions:
A percentage is withheld at the applicable
rate.
The net amount is paid to the beneficiary.
The withheld amount is remitted to the tax
authority on behalf of the beneficiary.
Example:
oIf a non-resident company A pays 1,000,000 for
₦
consultancy services:
WHT (10%) = 100,000
₦
Payee receives 900,000
₦
₦100,000 is paid to FIRS and credited to the
payee’s tax account.
7
Going Specific - WHT
Withholding Agents
o Any person or organization making WHT-
applicable payments is a withholding agent.
o Agents must:
Deduct the correct rate
Remit it on time
File appropriate returns
Issue a Withholding Tax Credit Note to
the payee
Importance to Beneficiaries
o WHT is not a final tax (except in certain cases
like dividends, interest, and rent for non-
residents).
o It is used to reduce the final tax liability
when filing annual returns.

8
Going Specific–WHTRatesinNigeria
Transaction Type
Corporate Recipients Non Corporate Recipients
Remarks
Resident
Non-
resident
Resident Non-resident
Dividends, Interest, Rent, Hire or
Lease
10% 10% 10% 10% Rates as specified in the law
Royalty 10% 10% 5% 5% Rates as specified in the law
Commission, consultancy,
technical, management, and
professional fees
5% 10% 5% 10%
Higher rate for non-residents to serve as final
tax
Supply of goods or materials other
than those specifically listed in this
schedule
2% N/A 2% N/A Simplified description and reduced rate to
address to address low margin
Co-location and
telecommunication tower services 2% 5% 2% 5% Lower rate to reflect low industry margins
Supply or rendering of services
other than those specifically listed
in this schedule
2% 5% 2% 5% Simplified description and reduced rates

9
Transaction Type
Corporate Recipients Non Corporate Recipients
Remarks
Resident Non-resident Resident Non-resident
Construction of road,
bridges, building and
power plants
2% 5% 2% 5% Further rate reduction to reflect lower margin
Any other form of
construction and
related activities
5% 10% 5% 10% Amount due from non-resident is final
Brokerage fee 5% 10% 5% 5% Subject to Para 7(11)
Directors’ fees N/A N/A 15% 20% Rates reflect marginal PIT rate for Directors.
Compensation for loss
of employment N/A N/A 10% 10% Section 36 of the CGT Act
Entertainers and
sportspersons
N/A 15% N/A 15% Applies on amounts earned in Nigeria
Winnings from lottery,
gaming, reality shows,
etc.
N/A N/A 5% 15% With effect from 1 October 2024

Deduction at Source
oWHT must be deducted at the point of payment
or credit, whichever occurs first.
oApplies whether payment is made in cash or by
bank transfer, cheque, or any other means.
Remittance
oWHT must be remitted on or before the 21st day
of the month following the month of deduction.
oUse appropriate remittance forms and payment
platforms (e.g., FIRS TaxPro Max).
10
Filing of Returns
o Monthly returns must be filed with the:
FIRS (for corporate and federal
transactions), or
State IRS (for individual payments and
personal services)
o Returns must include:
Name, TIN, and address of the payee
Amount paid and amount withheld
Nature of service rendered

Stamp Duty is a tax imposed on instruments
(documents) that record transactions between parties,
such as agreements, contracts, and conveyances.
11
STAMPDUTIES
An instrument refers to any written document
that transfers a right, interest, or obligation.
Examples:
• Agreements (loan, lease, tenancy, service)
• Receipts
• Share transfer documents
• Deeds of assignment
• Property conveyance documents
• Contract notes
• Bank deposit slips of 10,000 and above
₦
(electronic transfers inclusive)
Governed
under:
Regulated by:
Purpose:
•Stamp Duties Act, Cap S8, LFN
2004 (as amended by the Finance
Acts)
•Federal Inland Revenue Service
(FIRS) for corporate transactions
•State Internal Revenue Services
(SIRS) for individual and
unincorporated businesses
•To legitimize documents, ensure legal
enforceability, and generate revenue
for government at federal and state
levels.

12
TypeofStampDuties
o Ad Valorem Duties
o Charged based on the value of
the transaction or instrument
o Examples: Property transfers,
share transfers, loan agreements
oFixed Duties
oCharged at a flat rate, regardless
of the transaction value
oExamples: Receipts, tenancy
agreements below a threshold,
proxies

13
Applicability of Stamp Duties
Transaction Stamp Duty Applicable? Remarks
Property sale/transfer Yes
Ad valorem; depends on property
value
Lease or tenancy agreement Yes
Fixed or ad valorem based on
duration
Share transfer Yes Ad valorem on share value
Loan agreement Yes Ad valorem
Service agreement Yes Ad valorem
Bank deposit/transfer > 10,000
₦ Yes ₦50 fixed stamp duty

14
Stamp Duties Rates
Instrument Type Rate Remarks
Deed of Conveyance / Property Transfer 1.5% (Ad Valorem)
Applies to property sales; exemptions for
properties valued at 10 million or less
₦
Loan Agreements (Unsecured) 0.125% (Ad Valorem) Applies to unsecured loan agreements
Legal Mortgages 0.375% (Ad Valorem) Applies to legal mortgage instruments
Lease Agreements (0–7 years) 0.78% (Ad Valorem) Applies to lease terms up to 7 years
Lease Agreements (8–21 years) 3% (Ad Valorem)
Applies to lease terms between 8 and 21
years
Lease Agreements (Above 21 years) 6% (Ad Valorem) Applies to lease terms exceeding 21 years
Tenancy Agreements 6% (Ad Valorem)
Applies to tenancy agreements; rate
confirmed for 2025
Contract Agreements 1% (Ad Valorem) Applies to general contract agreements
Receipts ( 10,000 and above)
₦ ₦50 (Flat Rate)
Applies to receipts for transactions of
10,000 and above
₦
Share Transfers Exempt
Share transfers are not subject to stamp
duties

15
Stamp Duties Agency
Payee/Transaction Type Responsible Authority
Companies FIRS
Individuals/Unincorporated bodies SIRS (State IRS)
Electronic transfers (₦10,000+) Banks (remit to FIRS/CBN)

16
Capital Gain Tax (CGT)
Definition:
Regulated by:
Purpose:
• Capital Gains Tax (CGT) is a tax on the profit
(gain) that arises when a chargeable asset is
sold, exchanged, or otherwise disposed of at a
price higher than its acquisition cost.
• Governed by the Capital Gains Tax Act (CGTA),
Cap C1 LFN 2004 (as amended).
•Flat rate of 10% on chargeable gains in Nigeria.

17
CGT Key Features
•Applies to Gains, Not Revenue
o Only the net profit from disposal is taxed—not the entire
proceeds.
•Flat Rate
o CGT is charged at a uniform rate of 10%, regardless of
income bracket.
•Applies to Both Individuals and Companies
o Individuals, partnerships, and companies are subject to CGT.
•Annual Assessment
o CGT is assessed and payable annually, alongside income
tax returns.
•Worldwide Basis for Residents
o Nigerian tax residents are taxed on worldwide chargeable
gains, subject to relief for foreign tax paid.
Chargeable assets include, but are not limited to:
o Land and buildings
o Stocks and shares
o Machinery
o Intellectual property (patents, trademarks, etc.)
o Business goodwill
o Collectibles (artworks, antiques, jewelry)
Note: CGT is not charged on the sale of trading stock or
inventory (those fall under income tax).

18
•When to Pay
o CGT is payable not later than 30 June after the year of assessment.
•Where to File
o Individuals: File with the State Internal Revenue Service (SIRS)
o Companies: File with the Federal Inland Revenue Service (FIRS)
•Returns Should Include:
o Description of the asset disposed
o Date of acquisition and disposal
o Cost and proceeds
o Computation of gain
o Payment evidence
CGT Filing & Payments

19
Comparative Summary of Transaction Tax Amendments Finance Acts (2019–2024)
Year VAT WHT Stamp Duties Capital Gains Tax (CGT)
2019
• VAT rate increased from 5% to 7.5%
(Effective 1st February 2020)
• Introduction of VAT exemption for
basic food items and educational
materials.
• WHT rate on road,
bridge, building, and
power plant contracts
reduced from 5% to 2.5%.
• Introduction of 50
₦
stamp duty on electronic
money transfers of
10,000 and above.
₦
• Exemption of CGT on
compensation for loss of
employment up to 10
₦
million.
• Exemption of CGT on asset
transfers during business
reorganizations, provided
certain conditions are met.
2020
• Clarification on VAT registration and
compliance for non-resident digital
service providers.
• No significant changes.
• Introduction of the
Electronic Money Transfer
(EMT) Levy: 50 on
₦
electronic transfers of
10,000 and above.
₦
• Introduction of a timeline
for CGT payment and filing:
taxpayers must file returns
and pay CGT twice a year, by
June 30 and December 31.

20
2021
• Empowerment of FIRS to appoint VAT
collection agents.
• Introduction of VAT obligations for non-
resident digital service providers.
• No significant changes.
• Mandate for the Minister
of Finance to make
regulations for the
administration of EMT Levy.
• Introduction of 10% CGT
on gains from the disposal
of shares in Nigerian
companies, with exemptions
for proceeds reinvested or
below 100 million.
₦
• Introduction of CGT on
securities lending
transactions.
2022 • No significant changes. • No significant changes. • No significant changes. • No significant changes.

21
2023
• Introduction of anti-avoidance transfer
pricing rules for VAT purposes.
• Empowerment of FIRS to appoint VAT
withholding/collection agents.
• Removal of VAT imposition at the point of
clearance on imported goods purchased via
electronic means through a non-resident
collection agent.
• Redefinition of "building" for VAT purposes
to exclude structures not permanently affixed
to land.
•No significant changes.
•Clarification on the
administration and sharing
of EMT Levy among federal,
state, and local governments.
• Inclusion of digital assets
(e.g., cryptocurrencies) as
chargeable assets subject to
10% CGT.
• Allowance for the
deduction of capital losses
from chargeable gains, with
a 5-year carryforward
period.
• Extension of rollover relief
to gains from the disposal
of shares and stocks,
provided proceeds are
reinvested within the same
assessment year.
2024 •No significant changes. •No significant changes. •No significant changes. •No significant changes.

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