REALWorld Law

Sale and purchase

Taxation of share deals

Which taxes are relevant/which transaction costs will be incurred when buying real estate via the shares in the owning company (share deal) and how are the transaction costs shared between the buyer and seller?



Section 2 (2) of Capital Gains Tax Act (as amended) provides that gains accruing to a person on disposal of shares in any Nigerian company registered under CAMA (irrespective of the real estate asset holding of the company) shall be subject to CGT at 10% of the gains. The exceptions to this rule are:

  • Where the proceeds from such disposal are reinvested in the same year of assessment in the acquisition of shares in the same or other Nigerian Companies (Note: CGT will apply to the portion of the gains not invested).
  • The proceeds of the share transfer is less than N100 million in any 12 consecutive months, provided the person making the disposals shall render appropriate returns to the FIRS on an annual basis.
  • The shares are transferred between an approved borrower and lender in a regulated Securities Lending Transaction as defined in the Companies Income Tax Act.

Furthermore, all documents relating to the transfer of stocks and shares are exempt from the payment of Stamp duties, as provided by the Stamp Duties Act (item 13 of the General Exemption Schedule). In practice, only a nominal stamp duty of NGN 500 is payable as stamping costs for a share transfer agreement in the event that the buyer is required to have the document stamped. It is also noteworthy that the Finance Act 2020 specifically excludes taxable persons from paying value added tax on supplies made as a consequence of the person selling the whole or part of its business. However, this exemption does not apply to companies engaged in u.pstream petroleum operations as described in the Petroleum Industry Act and Petroleum Profits Tax Act.