APPLICABILITY OF TAXES ON REAL ESTATE TRANSACTIONS IN NIGERIA
The various taxes that apply on real estate transfer transaction includes Capital Gains Tax (CGT), Stamp Duties.
Capital gains realized on the sale of real property is subject to CGT and payable by the seller of real estate. The rate under the Capital Gains Tax Act is 10% of the gains from the sales. In reality, the tax authorities (Federal Inland Revenue Service) decides the amount payable on a ‘best of judgment assessment’ basis which uniformly is about 1% of the value of the property.
All deeds for transfers of interests in real property are required to be stamped under the Stamp Duties Act and the purchaser or assignee is responsible for this payment. The Federal Inland Revenue Service (FIRS) assessed rates for stamping of transfer documents for is 1.5% for transactions involving a corporate entity.
A different tax regime and rates apply to transfer transactions where individuals are parties and the rates vary within the 36 States in Nigeria. In Lagos State, the rates payable for CGT and Stamp Duties is currently 0.5% each of the property value.
VAT is not chargeable on real estate. The Law expressly excludes interests in land specifically from the definition of goods subject to VAT.
The Land Use Act provides that the Governor of a State where a property is located shall give consent for a transfer of the interests in the property to be valid. The Governor’s consent is subject to payment of official fees or taxes and other fixed costs including all applicable property taxes for the registration of the transfer. The purchaser is responsible for ensuring that all required costs and taxes for consent and registration of the transferred interests are paid.
The fees for the Solicitors and other professional consultants including estate surveyors and agents also arise in transfer of property transactions.
The purchaser is usually responsible for the payment of the transaction costs and the taxes except where expressly agreed by the parties that the costs and taxes are to be shared by the parties.
WRITTEN BY: CHAMAN LAW FIRM TEAM
TEL: 08065553671, 08024230080