What taxes are payable in relation to the purchase of real estate via the various types of corporate vehicle available and who is responsible for the payment of these taxes?
The taxes applicable to real estate transfer transaction are: Capital Gains Tax (CGT), Stamp Duties.
Capital gains realised 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) decide the amount payable on a ‘best of judgment assessment’ basis which uniformly is about 1% of the value of the property.
It is noteworthy that rollover relief can be claimed where proceeds of disposal are used to purchase a new asset of the same class within 12 months before or after the disposal of the old asset. The classes of the assets eligible for relief include Buildings and Landed property (Class 1 Assets).
Stamp duty is chargeable either at fixed rates or ad valorem (ie in proportion to the value of the consideration) depending on the class of instrument All deeds or instruments 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.