Abuja: The Presidential Committee on Fiscal Policy and Tax Reforms has announced that the newly implemented Capital Gains Tax (CGT) regime on shares is structured to mitigate business risks, bolster investor confidence, and establish a more equitable tax system. The Chairman of the committee, Mr. Taiwo Oyedele, revealed these developments during a virtual market engagement with the Nigerian Exchange Group (NGX) concerning the capital gains tax.
According to News Agency of Nigeria, Mr. Oyedele elaborated that the reform is intended to reduce entry costs for startups, enhance cash flow for businesses, and safeguard the nation's tax base while simplifying compliance for both individuals and companies. Under the previous regime, capital gains on shares were subject to a flat tax rate of 10 percent, without provisions for capital losses relief and limited exemptions.
The new regime introduces a progressive taxation system, where gains are taxed based on the payer's income band, aligning with practices in countries like the U.S., U.K., South Africa, Ghana, and Brazil. Oyedele noted that capital gains would now be taxed on a net gains-and-losses basis, with reinvestment relief maintained. Furthermore, exemptions will be applicable to small companies and individuals with proceeds up to N150 million or gains not exceeding N10 million.
Additional relief measures include reorganization exemptions and the continuation of a low withholding tax on dividends. Oyedele emphasized that beyond capital gains, the government is exploring broader strategies to make Nigeria's tax environment more appealing for investment. Proposed measures include reducing Companies Income Tax (CIT) from 30 percent to 25 percent, consolidating multiple taxes from over 60 to fewer than 10, eliminating the minimum tax on turnover, and increasing the threshold for CGT exemptions on shares.
The reforms also consider exemptions for Real Estate Investment Trusts (REITs) and securities lending, allowing VAT credits on assets to minimize investment costs, and introducing personal income tax exemptions or final withholding tax on fixed income securities. Oyedele highlighted that these reforms aim to create a level playing field, align Nigeria with global best practices, and position the capital market as a catalyst for economic growth.
In his remarks, NGX Chairman, Dr. Umaru Kwairanga, remarked that this session was timely, given the Federal Government's ongoing comprehensive tax system overhaul. Kwairanga emphasized the importance of the capital gains segment to both individuals and institutions, underscoring the need for stakeholders to fully comprehend the introduced changes.