Gone are the days when investing was only for the wealthy elite. Today, everyday Nigerians are buying shares, joining investment cooperatives, earning rental income, and even investing internationally. But with these opportunities comes a question that keeps many investors up at night: how much of my profit does the government want?
The Nigeria Tax Act, 2025 recently signed into law by President Tinubu, has arrived with answers, and some surprises. Whether you’re a first-time shareholder or a seasoned real estate investor, these new rules will affect how your investment gains are taxed.
What Exactly Counts as a Dividend Now?
You might think a dividend is just the cash payment a company sends to your bank account. Think again. The new tax law has expanded what counts as a dividend, and some of these might catch you off guard.
In the old way, only formal cash dividends were taxed. According to the new law, however, almost anything of value you get from a company’s profits counts as a dividend. This now includes cash dividends paid directly to you. It also covers stock dividends, where you receive shares instead of cash. Additionally, it includes any undistributed profits deemed appropriated for shareholders’ benefit. Loans or advances to shareholders also fall under this. Excessive management or technical fees to related parties count as disguised distributions. Share buybacks may also be taxable, depending on their structure. Certain liquidation proceeds can also be treated as income, depending on how they are structured.
In all, the government’s message is clear: if you’re benefiting from company profits in any way, they want their share of taxes. Even if you never see actual cash, you might still owe tax on the benefit you received.
How Much Tax Will You Actually Pay?
Now that you know what counts as investment income, let’s talk about the actual numbers, how much tax you’ll pay under the Nigeria Tax Act, 2025.
1. Dividend Income
If you receive dividends from a Nigerian company, they’re subject to Withholding Tax (WHT) at 10%, deducted before you even get paid. For non-residents, this 10% usually represents a final tax, meaning you don’t need to file an additional tax return in Nigeria for those dividends. If the country where you have your investment has a Double Taxation Treaty (DTT) with Nigeria, like the UK (7.5%), France (7.5%), or South Africa (7.5%), you may qualify for a lower withholding rate. But to benefit, you must file for relief through the FIRS under treaty procedures. However, this “final tax” treatment only applies if you have no other business presence in Nigeria. If you maintain a permanent establishment here, like a branch office or ongoing trade, your Nigerian profits may face additional tax assessment beyond the withheld amount.
2. Interest Income
Interest earned from government securities (e.g., Treasury Bills, FGN Bonds) remains tax-exempt, while interest from corporate bonds or savings instruments attracts 10% withholding tax, which for individuals is also final.
3. Capital Gains Tax (CGT)
The capital gains tax rate under the 2025 Act remains 10%. However, not all gains are taxed. If your total annual share sales are below ₦100 million, you pay no CGT on those transactions. However, once your sales exceed ₦100 million, the portion above that threshold is taxed at 10%. This applies whether you’re selling through the stock market, private placements, or bond transfers. Foreign investors and non-residents are only taxed on Nigerian-source gains, meaning that if you sell shares of a foreign company abroad, Nigeria won’t tax those profits.
4. Rental and Real Estate Income
Rental income and profits from real estate investments are subject to personal income tax for individuals or company income tax for incorporated entities. Individuals pay under graduated income tax rates (7% to 24% depending on income). Real Estate Investment Companies (REICs), if they distribute at least 90% of their income, pay no corporate tax, but their investors must pay tax on the dividends they receive (typically 10% WHT).
5. Business and Trading Income
If your investments are structured as active business ventures, for instance, trading, real estate development, or private equity management, then those profits are taxed as business income under the same personal or corporate rates (7–24% for individuals, 30% for companies).
Putting It Simply
- Dividends: 10% (usually final)
- Interest: 10% (final for individuals)
- Capital Gains: 10% (only if total share sales exceed ₦100 million annually)
- REIC Income: Tax-free for company, 10% for investor
- Business Profits: 7–24% depending on personal income level
The ₦100 Million Rule
Many investors believe that profits from selling shares or bonds are always tax-free in Nigeria. This is mostly true, but the new law introduces an important threshold. Gains from selling Nigerian stocks and securities remain exempt from Capital Gains Tax (CGT), but only if your total proceeds in a given year are below ₦100 million.
However, if your annual sales of shares or securities exceed ₦100 million, the portion above that threshold becomes subject to CGT at the prevailing rate. This change ensures that larger investors contribute fairly while keeping smaller, retail investors exempt from capital gains tax. If you’re a Nigerian tax resident, gains from selling foreign stocks may still be taxable in Nigeria, even if the shares are listed abroad.
How Taxpal Can Help
Managing investment taxes can be complex, especially with the new rules taking effect on January 1, 2026. Taxpal provides comprehensive tax support for investors, including dividend tax calculations, capital gains assessments, non-resident tax planning and compliance monitoring.
To get started, visit their website and choose between a consultation or portal access. Whether you’re a casual investor or manage a substantial portfolio, Taxpal will help you navigate the new tax landscape efficiently and legally.
