Which taxes are relevant/which transaction costs will be incurred when buying real estate as an asset (asset deal) and how are the transaction costs shared between the buyer and seller?
Real estate sale and purchase transactions are by law subject to taxation. The applicable taxes are the following:
Tax on gains from disposal of property is based on gains or profits from the sale of property and is payable by the seller. Under sections 33 – 46 of the Nigeria Tax Act 2025 (NTA), which consolidates the former capital gains tax regime, the tax treatment now depends on the status of the seller. For individuals, gains from disposal of land or buildings are taxed under the Personal Income Tax framework at progressive rates from 0–25%. For companies, gains arising from the disposal of real estate are taxed at 30%, aligned with the Companies Income Tax rate. Gains are calculated based on the actual profit realised, after deducting acquisition costs, improvement expenses, and costs of disposal, in line with the computation rules under the new Act.
Stamp duty is payable on the instrument effecting the transfer of an interest in land. Stamp duties are imposed under Part I of the NTA(Section 124) on instruments executed in Nigeria or relating to property situated in Nigeria. Such instruments must be stamped within 30 days of execution in accordance with Section 126(1). The NTA now recognises electronic stamping and digital denotation of duties (Section 125(1)). Importantly, Section 126(2) expressly provides that the transferee (buyer) of an interest in real property is responsible for payment of the stamp duty.
Stamp duty is typically assessed as a percentage of the value of the property in accordance with the applicable schedule and administrative practice of the relevant tax authority.
Consent and registration fees.
By law, transfers of real estate must be with the consent of the State Governor to be valid. The law also provides that transfer of real estate interests for terms that are above three years should be registered. The different states have different rates for consent fees and registration fees. The rates applicable in Lagos State are 1.5% and 0.5% respectively for consent and registration fees.
Tax relief may still be available in limited circumstances, such as certain group restructurings or qualifying transactions under specific legislation, provided the statutory conditions (including holding periods) are satisfied. Furthermore, the Nigeria Startup Act 2022 provides that tax on gains will not be charged on gains that accrue from the disposal of assets (including shares and land) by investors (angel investor, venture capitalist, private equity fund, accelerators or incubators) with respect to a labelled startup under the Startup Act, provided the assets have been held in Nigeria for a minimum of 24 months.
VAT on Real Estate Transactions
VAT is imposed under Section 144 of the NTA (Section 144) on taxable supplies, subject to the exemptions listed in Part IV of Chapter Eight (Section 186). VAT is charged at 7.5% on taxable supplies (Section 146). However, the law makes important distinctions for real estate: The sale or transfer of land or buildings, including interests in land or buildings, is exempt from VAT under Section 186(1)(l). The sale or lease of residential accommodation is therefore not subject to VAT. VAT will, however, apply to related taxable services connected with real estate, including:
These are treated as taxable supplies of services under Section 146(b) and are subject to VAT at 7.5%.