A company sells a plot of land it bought three years ago for ₦25 million. It receives ₦42 million and pays an agent ₦1.25 million. Is the ₦15.75 million gain taxed? In which year? Would it matter if a state government had bought the land compulsorily instead? From 2026 the old Capital Gains Tax Act is gone and chargeable gains are simply part of a company’s total profit, taxed at the company rate.
The exam tests the computation, the exemptions and the special situations.
This topic covers chargeable assets and disposals, consideration and market value, the date of disposal, the computation (with and without capital allowances), partial disposals, instalment payments, lost or destroyed assets, location of assets, indirect transfers, and the exempt gains. The previous topic covered capital allowances; they feed the computation when an asset has had them. The next covers investment income.
The Pathfinder papers reviewed so far do not test chargeable gains as a stand-alone question; the March/July 2020 paper listed capital gains tax at 10% in its rates table, a rate that no longer applies to companies.
In 30 seconds
A chargeable gain arises on a chargeable disposal of a chargeable asset (any property, wherever situated, including shares, options, debts, digital assets and foreign currency). From 2026 the gain goes into total profit and is taxed at the company rate (30%). Gain = proceeds − cost (or, if capital allowances were claimed, − TWDV), less incidental costs.
Use market value when the deal is not at arm’s length: the higher of proceeds and market value for the disposal, the lower of cost and market value for the acquisition. Part disposal: cost × A ÷ (A + B). Instalments over more than 12 months: gain spread in proportion to receipts.
Exempt: compulsory acquisition of land (conditions), gifts, share disposals below ₦150m with gain ≤ ₦10m, startup investments held 24 months, pension assets and more. Shares in a foreign entity are Nigerian if over 50% of value comes from Nigerian assets.
Key terms in plain English
| Term | What it means |
|---|---|
| Chargeable asset | Any property, including shares, options, debts and digital assets, wherever situated |
| Chargeable disposal | A sale, lease, transfer, assignment, compulsory acquisition or other disposition, including compensation received |
| Market value | The price the asset would fetch in an arm’s length sale in the open market |
| Part disposal | A disposal of part of an asset, or of an interest in it |
| Incidental costs | Fees and costs of acquiring, improving or disposing of the asset |
| Indirect transfer | A sale of shares in a foreign entity that changes ownership of a Nigerian company or asset |
Syllabus check
This topic is in syllabus area B (taxation of companies and investment income, 35% of marks). It covers:
- the concept, scope and administration of the tax on gains;
- allowable and disallowable expenses, and the exemptions;
- full and part disposals, special situations, location of assets and market value;
- reinvestment reliefs, delayed receipts and losses.
CAMA 2020 and chargeable gains
The Companies and Allied Matters Act 2020 (CAMA 2020) is the company law of Nigeria. The sections below apply to this topic.
| Section | What it says | Link to this topic |
|---|---|---|
| s. 711 | A merger or arrangement between companies binds them once the Court sanctions it, after approval by three-quarters in value of the members at each meeting | Transfers inside a court-approved scheme still need a gains analysis |
| s. 377(1) and s. 378 | Directors prepare financial statements that give a true and fair view | Disposals and their gains appear in these statements |
| s. 305 and s. 308 | Directors must act in good faith, with the care, diligence and skill of a reasonably prudent director | Directors should obtain independent valuations for non-arm’s length sales |
The rules in more depth
Chargeable assets and disposals
All forms of property are chargeable assets, in or outside Nigeria:
- any asset, shares, options, rights, debts, digital or virtual assets
- any currency other than naira
- property the person created or owns without acquiring
A chargeable disposal includes a sale, lease, transfer, assignment, compulsory acquisition or any other disposition, even if the payer acquires nothing.
It also covers compensation for loss of office, insurance receipts for loss or damage to assets, sums for giving up or not exercising a right, and consideration for use or exploitation of an asset. A part disposal arises when an interest in the asset is created for another person and part remains with the owner.
Consideration and market value
Normally cost is the amount paid and consideration is the proceeds. Market value replaces them where the deal is not at arm’s length, the consideration cannot be valued, the disposal is by a trustee for creditors, or on death. A gift is treated as acquired at the last arm’s length price or, if none, at market value on the date of disposal.
A creditor who takes an asset for a debt is treated as paying no more than market value. Practical rule: for proceeds, use the higher of actual proceeds and market value; for cost, use the lower of actual cost and market value. No reduction is made for cash or bulk discount.
The date of acquisition or disposal is when there is an enforceable right to acquire or a binding duty to dispose of the asset. For a conditional contract it is the date the condition is met (or the contract date where the price does not depend on the value at that time); for an option it is the date of exercise.
Computation
- If capital allowances were claimed on an asset used in the business, deduct only the residue (tax written down value) from the proceeds.
- If not, deduct the amount paid wholly and exclusively to acquire the asset.
- In both cases deduct incidental costs: improvements made to enhance value before sale; costs of establishing, preserving or defending title; costs of disposal (surveyors, valuers, accountants, legal advisers, advertising); and incidental costs of acquisition such as stamp duty and conveyance.
Part disposal
Cost (or TWDV), plus improvement costs, is apportioned: cost of part sold = C × A ÷ (A + B), where A is the proceeds (or market value) of the part sold, B is the market value of the part kept and C is the cost of the whole.
Instalments
Where consideration is paid in instalments over more than 12 months, the gain accrues in proportion: gain for the year = consideration received in the year ÷ total consideration × total gain, deemed to accrue on the last day of the year of assessment (on cessation or death, on that date). Irrecoverable amounts are adjusted.
Assets lost or destroyed
If compensation is used within three years to buy a replacement asset, then (a) if compensation plus scrap or residual value exceeds the cost of the replacement, the excess is a chargeable gain; (b) if it is less than the cost of the replacement, the shortfall is treated as an additional asset for capital allowances.
Allowances on the new asset are limited to the residue of the old, apart from that additional amount.
Bargains of several transactions
A single bargain made up of several transactions is treated as a single disposal, and separate considerations are apportioned.
Location of assets
Only gains on assets located in Nigeria are taxed. Immovable and tangible movable property: where it is. Debts: Nigeria if the creditor is resident or has a permanent establishment (PE) in Nigeria to which the debt relates. Registered shares: where registered. Shares in a Nigerian company: Nigeria. Goodwill: where the business is carried on. Patents, trademarks, designs: where registered. Copyrights, franchises, licences: where exercisable.
Digital assets: where the beneficial owner is resident or has a connected PE. Indirect transfers (s. 47): a disposal of shares by a non-resident is a chargeable gain where it changes the ownership or group membership of a Nigerian company or the interest in an asset in Nigeria, and shares in a foreign entity are Nigerian if over 50% of their value in the previous 365 days comes from Nigerian entities or assets.
Exempt gains (s. 162 and related provisions)
- Compulsory acquisition of land by an authority with compulsory powers, if the owner did not acquire the land knowing it was likely to be acquired and did not advertise it for sale.
- Gifts acquired and disposed of without consideration.
- Shares in a Nigerian company where proceeds are below ₦150,000,000 and the gain does not exceed ₦10,000,000 in 12 consecutive months; shares moved in a regulated securities lending transaction; or proceeds reinvested in Nigerian shares in the same year (the part not reinvested is taxed in proportion).
- Startup investments by angel investors, venture capitalists, private equity funds, accelerators or incubators, held in Nigeria for at least 24 months.
- Individuals only: principal private residence (one acre, once in a lifetime); personal chattels up to the higher of ₦5,000,000 and three times the annual minimum wage (not currency); up to two private motor vehicles a year; compensation for personal injury or loss of office up to ₦50,000,000; life assurance and deferred annuity rights (unless bought for money).
- Pension funds and assets; retirement benefit investments; decorations for valour; property held in trust for charities, friendly societies, co-operatives and trade unions.
Worked examples
Example 1: land with incidental costs. Land cost ₦25,000,000 and is sold for ₦42,000,000. An agent is paid ₦1,250,000.
- Net proceeds.
42,000,000 − 1,250,000 = ₦40,750,000. - Gain = 40,750,000 − 25,000,000 = ₦15,750,000.
Example 2: asset with capital allowances. Plant that cost ₦45,000,000 has had ₦9,000,000 of allowances. It is sold for ₦55,000,000.
- TWDV = 45,000,000 − 9,000,000 = ₦36,000,000.
- Gain = 55,000,000 − 36,000,000 = ₦19,000,000.
Example 3: part disposal. Land that cost ₦30,000,000 is part-sold for ₦40,000,000. The unsold part is worth ₦35,000,000.
- Cost of the part sold.
30,000,000 × 40,000,000 ÷ (40,000,000 + 35,000,000) = ₦16,000,000. - Gain = 40,000,000 − 16,000,000 = ₦24,000,000.
Example 4: asset destroyed. An asset that cost ₦10,000,000 is destroyed. Insurance pays ₦7,000,000; residual value is ₦1,000,000; a replacement costing ₦5,000,000 is bought within three years.
- Compensation plus residual = ₦8,000,000, which exceeds the replacement cost of ₦5,000,000.
- The excess, ₦3,000,000, is a chargeable gain.
Example 5: compulsory acquisition. A state government buys land that cost ₦12,500,000 for ₦30,000,000.
- The gain would be ₦17,500,000.
- If the exemption conditions are met, it is exempt.
Example 6: instalments. A gain of ₦20,000,000 arises on a sale for ₦50,000,000, paid ₦15,000,000 in the year of sale and ₦35,000,000 over the next two years.
- Year of sale.
15,000,000 ÷ 50,000,000 × 20,000,000 = ₦6,000,000. - Later receipts are taxed in proportion in the years they are received.
How to score full marks
- Classify the asset and the disposal before computing.
- Choose TWDV or cost depending on capital allowances.
- Apply market value in non-arm’s length deals.
- List incidental costs separately.
- State the exemption and its conditions before excluding a gain.
- Name the year of assessment and add the gain to total profit.
Common mistakes in the exam
- Taxing a company’s gain at 10%, the old capital gains rate.
- Deducting cost, not TWDV, for an asset with allowances.
- Using the wrong side of market value.
- Giving individual-only exemptions to a company.
- Forgetting the incidental costs of disposal.
- Claiming the compulsory acquisition exemption without its conditions.
Quick revision
- Gain = proceeds − cost or TWDV − incidental costs; added to total profit.
- Part disposal: C × A ÷ (A + B).
- Instalments over 12 months: spread in proportion to receipts.
- Lost asset: compensation + residual above replacement cost is a gain.
- Share exemption: proceeds under ₦150m and gain ≤ ₦10m, or reinvestment.
- CAMA 2020: ss. 305, 308, 377(1), 378, 711.
Practice questions
These are original questions written in the style of the Institute of Chartered Accountants of Nigeria (ICAN) exam. Try each one before you open the answer. Full model answers follow the written questions.
Recall check: multiple choice
Recent ICAN papers are written, although older papers such as May 2014 included multiple-choice questions. These questions are for quick recall. The written questions that follow are closer to the exam.
Question 1. From 2026 a company’s chargeable gain is:
- Taxed at 10% separately
- Included in total profit and taxed at the company rate
- Always exempt
- Taxed by the state
Show the answer
B. The NTA 2025 repealed the Capital Gains Tax Act and taxes gains within total profit.
Question 2. For an asset on which capital allowances were claimed, the deduction from proceeds is:
- Original cost
- Tax written down value
- Market value
- Nil
Show the answer
B. Only the residue (TWDV) is deducted.
Question 3. In a non-arm’s length sale, the proceeds taken are:
- The lower of proceeds and market value
- The higher of proceeds and market value
- Cost
- Nominal value
Show the answer
B. Use the higher of actual proceeds and market value.
Question 4. In a part disposal, the cost of the part sold is:
- C × A ÷ (A + B)
- C ÷ 2
- A × B
- C − A
Show the answer
A. A is proceeds of the part sold, B market value of the part kept, C cost of the whole.
Question 5. Compensation for a destroyed asset is used to buy a replacement within:
- One year
- Two years
- Three years
- Five years
Show the answer
C. The replacement must be bought within three years of receipt.
Question 6. Gains on shares in a Nigerian company are exempt if proceeds are below:
- ₦50m
- ₦100m
- ₦150m with gain ≤ ₦10m in 12 months
- ₦500m
Show the answer
C. Proceeds below ₦150m and gain not above ₦10m in any 12 consecutive months.
Question 7. Foreign entity shares are treated as located in Nigeria if over what share of value comes from Nigerian assets?
- 10%
- 25%
- 50%
- 75%
Show the answer
C. Over 50% of value in the 365 days before sale.
Question 8. The principal private residence exemption applies to:
- Companies
- Individuals, once in a lifetime
- Trusts only
- Any taxpayer, repeatedly
Show the answer
B. It is an individual relief, up to one acre.
Question 9. A gain is spread over instalments if consideration is paid over more than:
- 3 months
- 6 months
- 12 months
- 5 years
Show the answer
C. Instalments over a period exceeding twelve months.
Question 10. Which section of CAMA 2020 sets the director’s duty of care and skill?
- Section 308
- Section 400
- Section 405
- Section 409
Show the answer
A. Directors should test the assumptions behind a decision.
Written questions
Question 11 (10 marks). (a) Define a chargeable asset. (3 marks) (b) State three transactions that are chargeable disposals. (3 marks) (c) State the market value rule for proceeds and for cost. (4 marks)
Question 12 (20 marks). Mobolaje Limited, a manufacturer, made these disposals in its year ended 31 December 2027:
- (a) a plant bought for ₦45,000,000 on 1 January 2026, on which ₦9,000,000 of allowances was claimed, sold for ₦55,000,000
- (b) land bought for ₦25,000,000 sold for ₦42,000,000, with ₦1,250,000 paid to an agent
- (c) land that cost ₦12,500,000, compulsorily acquired by a state government for ₦30,000,000
Compute the chargeable gains and the amount included in total profit, stating the year of assessment. (20 marks)
Question 13 (10 marks). (a) State four exempt gains. (4 marks) (b) State the conditions for the compulsory acquisition exemption. (3 marks) (c) Explain the treatment of a gain where consideration is paid in instalments over 24 months. (3 marks)
Model answers
Show the model answer to Question 11
(a) Chargeable asset (3 marks). All forms of property, whether situated in Nigeria or not, including shares, options, rights, debts, digital assets and incorporeal property, any foreign currency, and property the person created or owns without acquiring. (3)
(b) Disposals (3 marks). Sale, lease, transfer, assignment, compulsory acquisition; compensation for loss of office; insurance receipts for loss of assets; sums for giving up a right; consideration for use of an asset. (1 each, any three)
(c) Market value (4 marks). Market value is the arm’s length open-market price. (1) For proceeds use the higher of actual proceeds and market value. (1.5) For cost use the lower of actual cost and market value. (1.5)
Show the model answer to Question 12
(a) Plant (7 marks).
- TWDV = 45,000,000 − 9,000,000 = 36,000,000. (2)
- Gain = 55,000,000 − 36,000,000 = ₦19,000,000. (3)
- The allowance is based on the cost, and only the TWDV is deducted. (2)
(b) Land (6 marks).
- Net proceeds.
42,000,000 − 1,250,000 = 40,750,000. (2) - Gain = 40,750,000 − 25,000,000 = ₦15,750,000. (4)
(c) Compulsory acquisition (4 marks). The gain of ₦17,500,000 (30,000,000 − 12,500,000) is exempt if the conditions are met. (4)
Total (3 marks). Chargeable gains in total profit = 19,000,000 + 15,750,000 = ₦34,750,000, taxed in the 2028 year of assessment (basis period ended 31 December 2027) at 30%. (3)
Show the model answer to Question 13
(a) Exempt gains (4 marks). Any four: compulsory acquisition of land; gifts; Nigerian shares below the ₦150m and ₦10m limits or reinvested; startup investments held 24 months; pension fund assets; valour decorations; property held in trust for charities. (1 each)
(b) Conditions (3 marks). The land is disposed of to an authority with compulsory powers; (1) the owner did not acquire it knowing it was likely to be acquired; (1) the owner took no step to advertise it for disposal. (1)
(c) Instalments (3 marks). Where payment extends beyond 12 months, the gain is spread in proportion to the consideration received each year. (2) Each instalment’s part of the gain is deemed to accrue on the last day of the year of assessment. (1)
Pathfinder on Gains on disposal, part disposals, market value, exemptions and indirect transfers
These are the ICAN Pathfinder questions that test this topic. ICAN owns the questions and the suggested solutions, so we point you to them and do not copy them. Open your Pathfinder, attempt each question under exam conditions, then check your answer against the notes above.
The question asked for the capital gains tax on artworks sold by auction, then for the Finance Act rules on connected-party transfers, compensation for loss of office and the filing date and penalty. It was set under the Capital Gains Tax Act at 10%; for years from 2026 a company gain is taxed within total profit at 30%, so use the layout in our worked examples.
Revise first: Computation
The question asked for the gain and tax when a company sold a warehouse and a factory, reinvested in a new factory and kept part of the proceeds, and for the Finance Act 2023 rule on roll-over relief on shares. The paper used the old Capital Gains Tax Act at 10%; our page shows the current treatment.
Revise first: Computation
The question asked which disposals qualify for roll-over relief (land, building and machinery, but not a vehicle), the gain and tax on each, savings certificates, and the Finance Act 2021 rules on shares in listed companies. Use our worked examples for the current treatment.
Revise first: Computation
The question asked for the gain when part of a property is sold (cost of the part sold by the market value apportionment), the new cost of the part kept, whether roll-over relief applies when reinvestment is late, and the due date. Use our sections on part disposal and computation for the current treatment.
Revise first: Part disposal
The question asked for the rule on gains of a non-Nigerian company on assets outside Nigeria (taxed when brought into Nigeria), then gains and roll-over relief on land, plant and a factory, and the due date. Use our computation section for the current treatment.
Revise first: Computation
The question asked for the gain on a relocation: a property, machinery with a loss and a generating set, the roll-over relief on each and the cost for capital allowances on the new assets. Use our worked examples.
Revise first: Computation
The question asked for the gain and tax on an industrial building (with roll-over relief), a part disposal of plant, equipment sold to a connected person at market value, the due dates, and the tax on compensation for loss of office. Use our sections on part disposal and computation.
Revise first: Part disposal
The question asked for the principles of disposal, then the gain on an option, an asset received in exchange for a debt, a building and plant with roll-over relief, each with its payment date. Use our worked examples for the current treatment.
Revise first: Computation
The question asked for the meaning of connected persons and artificial transactions, then the gain on land, plant, a vehicle and a generator where market value replaced the price for connected buyers, with roll-over relief (not for vehicles). Use our computation section for the current treatment.
Revise first: Computation
The March/July 2020 Pathfinder listed capital gains tax at 10% in its rates table and did not set a stand-alone gains question. For years from 2026 a company’s gain is taxed within total profit at 30%, so practise the worked examples.
Revise first: Worked examples
Source: ICAN Pathfinder, Advanced Taxation. Diets covered: May Diet, 2026; May Diet, 2025; November Diet, 2024; May Diet, 2024; November Diet, 2023; May Diet, 2023; November Diet, 2022; May Diet, 2022; November Diet, 2021 and March/July Diet, 2020.
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