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.
The old way: Only formal cash dividends were taxed.
The new way: 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.
The New Reality: Taxes on Profits You Never Received
Here’s where things get interesting, and potentially expensive. The 2025 Tax Act introduces something many investors haven’t seen before: taxes on profits that companies keep but don’t distribute.
How it works: If a company makes good profits but doesn’t pay out a reasonable portion as dividends, the tax authority might assume this is a trick to avoid taxes. They can then treat some of those retained profits as if they were distributed to you, and tax you accordingly. This especially affects family businesses and closely-held companies where owners might prefer to keep profits in the company rather than pay dividends (and dividend taxes).
The protection: Companies can still retain profits for legitimate business reasons like expansion, equipment purchases, or debt repayment. The key is having clear, documented plans for how those retained funds will be used.
What this means for you: Even if you never receive a dividend payment, you might still have a tax bill if the authorities believe profits were effectively distributed to you.
Real Estate Investment Companies: Special Treatment
Real Estate Investment Companies (REICs) are becoming popular among Nigerians who want to earn rental income without the hassle of directly owning property. The new law gives these companies special tax treatment that’s worth understanding.
The deal: If an REIC distributes at least 90% of its rental income and capital gains to investors, it doesn’t pay corporate income tax on those distributed profits. Instead, you, the investor, pay tax on your share of the income.
Why this matters: This “pass-through” taxation means the income is only taxed once (at your level) rather than twice (at the company level and then again when distributed to you).
The catch: If the REIC keeps more than 10% of its income, it loses this special treatment and gets taxed like any other company.
For REIC investors: Expect to report and pay tax on your share of the profits, even though the company itself might not pay tax on them.
Non-Resident Investors: Simpler but Stricter
If you’re a Nigerian living abroad but earning dividends from Nigerian companies, the new rules aim to make things clearer while ensuring the government gets its due.
The basics: Companies paying you dividends must deduct withholding tax at source, typically 10% for dividends. For many non-residents, this withholding tax is final, meaning you don’t need to file additional tax returns in Nigeria for that income.
The treaty advantage: If you live in a country that has a double taxation treaty with Nigeria, you might qualify for lower withholding rates depending on the treaty terms.
The important exception: 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.
Selling Shares: 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.
The exemption: 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.
The threshold: If your annual sales of shares or securities exceed ₦100 million, the portion above that threshold becomes subject to CGT at the prevailing rate.
The logic: This change ensures that larger investors contribute fairly while keeping smaller, retail investors exempt from capital gains tax.
For foreign stocks: 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. Keep detailed records of your purchase costs, dates, and transaction fees.
Real-Life Examples
Consider Chinedu, who owns shares in three Nigerian companies. Throughout 2026, he sells shares worth ₦80 million. Since this is below the ₦100 million threshold, he pays no Capital Gains Tax on his profits.
Amaka, however, sells shares worth ₦150 million in the same year. The first ₦100 million remains tax-free, but she’ll pay CGT on the remaining ₦50 million.
Tunde lives in London but owns shares in a Nigerian bank. When the bank pays dividends, they automatically deduct 10% withholding tax. Since the UK has a tax treaty with Nigeria, Tunde might qualify for a reduced rate, but he needs to apply for it properly.
What You Should Do Now
1. Keep detailed records: Track all your investment transactions, including purchase dates, amounts, dividends received, and any taxes already withheld. This documentation will be crucial for accurate tax calculations.
2. Understand your residency status: If you live abroad but earn from Nigerian investments, clarify whether you qualify as a non-resident for tax purposes and whether any tax treaties might benefit you.
3. Monitor your annual sales: If you’re an active trader, keep track of your annual share sales to know when you’re approaching the ₦100 million CGT threshold.
4. Review your investment structure: Consider whether your current investment setup takes advantage of available exemptions and structures your affairs in the most tax-efficient way possible.
The Bottom Line
Investing remains one of the most effective ways to build wealth, but the tax landscape is evolving. The Nigeria Tax Act, 2025 brings clarity to many previously grey areas while expanding the government’s reach into investment income.
The key to staying compliant and avoiding unnecessary penalties, is understanding the rules and maintaining proper records. By knowing how the tax system views your investments, you can make smarter decisions, take advantage of legitimate exemptions, and plan your finances more effectively.
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.
