A property company collects rent, sells a building, pays stamp duty on the deed and charges VAT on a service. A farming company sells maize, and a bank lends it money at 15%. A real estate investment company holds a portfolio on behalf of thousands of investors and passes most of the rent on to them.
Each of these has its own treatment, and the exam asks about the exemptions and the conditions that attach to them.
This topic covers the taxes on real estate, the real estate investment company under the investment scheme, the meaning of agricultural business and primary agricultural production, the incentives for farming, and the exempt interest on agricultural loans. The previous topic covered the interest restriction. The next covers transport, telecommunications, banking and insurance.
In 30 seconds
Real estate taxes: company or personal income tax; withholding tax (10% to a company, 5% to an individual); tertiary education tax 2%; VAT 7.5%; land use charge; stamp duty. REIC: rent and dividend received for shareholders are exempt if at least 75% is distributed within 12 months after the year end; gains and other income are taxable.
Agriculture: pioneer status for 4 + 2 years; tractor duty cut from 35% to 5%; interest on agricultural bank loans exempt if the moratorium is at least 12 months and the rate is not above the base lending rate; exempt from minimum tax.
Key terms in plain English
| Term | What it means |
|---|---|
| REIC | A real estate investment company approved by the SEC |
| REIS | A real estate investment scheme that pools funds in real estate |
| Primary agricultural production | Raw crops, live animals, timber and fish, without processing |
| Moratorium | A period at the start of a loan with no repayments |
| Base lending rate | The weighted average cost of funds to a bank |
| Cottage industry | A home-based industry |
Syllabus check
This topic is in syllabus area D, company taxation. It covers:
- taxes on real estate and the real estate investment company
- agricultural business and primary agricultural production
- farm incentives and exempt loan interest
CAMA 2020 and these businesses
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. 377(1) and s. 378 | Directors prepare financial statements that give a true and fair view | The accounts separate taxable income from the exempt rent and dividend of a real estate investment company |
| s. 305 and s. 308 | Directors must act in good faith and with the care, diligence and skill of a prudent director | Directors answer for distributing the required 75% on time |
| s. 119 | A company must keep proper books of account | Records of distributions and rent received support the exemption |
The rules in more depth
Taxes on real estate
| Tax | Treatment |
|---|---|
| Income tax | Rent and premium from a right to use property are taxable. Individuals pay the graduated rates (7% to 24% to 2025); companies pay 20% or 30% of total profit by turnover |
| Withholding tax | The payer deducts 10% from a company and 5% from an individual and remits it; tax on a dividend is final |
| Tertiary education tax | 2% of assessable profit, except for a small company |
| VAT | Real estate companies register on commencement and charge 7.5% on taxable goods and services |
| Land use charge | Charged each year on property owners in Lagos; similar charges are tenement rate and ground rent |
| Stamp duty | Written documents on property must be stamped: 75 kobo per ₦200 on mortgages and similar; 75 kobo per ₦50 on conveyances and sales of real property |
Real estate investment companies (REIC)
A REIC is a company, including a real estate unit trust, approved by the Securities and Exchange Commission to operate a real estate investment scheme (REIS) (section 105 as amended in 2021). A REIS pools funds from investors to hold portfolios of income generating real estate, and is expected to distribute at least 75% of its income within 12 months.
Its income is rent, dividend from another REIC, gains on disposal of assets and other income such as fees.
- Section 19 (dividend basis): rent and dividend income distributed to shareholders under a REIS is deducted from the dividend paid before the test is applied. The distribution must be at least 75% of the rent or dividend income, made within 12 months after the end of the financial year in which it was received.
- Section 23(1)(s): rent and dividend income received by a REIC under a REIS is exempt in the company’s hands, because it is treated as received for its shareholders. It is taken out of the profit if it is already in. If the 75% and 12 month conditions are not met, the undistributed income is taxable.
- Section 24(1)(k): dividends or mandatory distributions made to shareholders under a REIS are allowable. As the income is exempt, the expense is not set against assessable profit a second time.
- Section 80: a distribution paid to a REIC under a REIS has no withholding tax and is not franked investment income unless the payment is to a REIC not under a REIS; a REIC withholds 10% on distributions to shareholders unless the shareholder is a REIC under a REIS.
- Gains from disposal of assets, fees and other income are not exempt and are taxed under the usual laws.
Agricultural business
An agricultural trade or business is connected with plantations for rubber, oil palm, cocoa, coffee, tea and similar crops; the cultivation of cereals, tubers, fruits, cotton, beans, groundnuts, sheanuts, benniseed, vegetables, pineapples, bananas and plantains; and animal husbandry (poultry, piggery, cattle, fish farming and deep sea fish trawling).
The profit from land used for farming or livestock is deemed to be what the land would have produced at the average standard of cultivation or practice in the neighbourhood, unless the authority is satisfied otherwise, so a business that does worse than its neighbours can be assessed on the average.
Primary agricultural production (section 11(4)) is primary crop production (raw crops, without processing), primary livestock production (live animals and direct produce such as raw meat, raw poultry, fresh eggs and milk), primary forestry production (timber, firewood, charcoal, seeds and saplings) and primary fishing production (all fish including ornamental fish), in each case without intermediate or final processing or derivative products.
Incentives: small and medium companies in primary agricultural production get pioneer status for an initial four years and an extra two on good performance, and import duty on tractors cut from 35% to 5%, on application to the President through the Minister of Trade, Industry and Investment. Agricultural companies are also excluded from minimum tax.
Interest on agricultural loans
Interest on a bank loan to a company in primary agricultural production, local fabrication of plant and machinery, or a cottage industry under the Family Economic Advancement Programme is exempt if the moratorium is at least 12 months and the interest rate is not higher than the bank’s base lending rate at the time the loan was granted, refinanced or restructured. A cottage industry is home-based rather than factory-based.
The position from 2026
The Nigeria Tax Act 2025 replaces the pioneer tax holiday with an Economic Development Incentive: a tax credit of 5% a year for five years on qualifying capital expenditure, available to eligible companies within five years of the production date, with unused credits carried forward for a further five years. Capital gains of a company are taxed at 30%. Use the rules above for periods ending before 1 January 2026.
Worked examples
Example 1: exempt agricultural loan interest. A bank earns interest on agricultural loans, with a base lending rate of 21%: ₦2,500,000 (24 months moratorium, 15%); ₦800,000 (6 months, 20%); ₦700,000 (18 months, 14%); ₦1,000,000 (6 months, 35%).
- ₦2,500,000 passes both tests (24 months, 15% below 21%): exempt.
- ₦800,000 fails the moratorium test: taxable.
- ₦700,000 passes (18 months, 14%): exempt.
- ₦1,000,000 fails on moratorium and rate: taxable.
- Exempt interest.
₦2,500,000 + ₦700,000 = ₦3,200,000.
Example 2: the 75% test. A REIC receives rent and dividend of ₦400,000,000 in 2024 and distributes ₦280,000,000 by the end of 2025.
- 75% × ₦400,000,000 = ₦300,000,000 required.
- The distribution of ₦280,000,000 is below the minimum, so the condition is not met and the income is taxable.
- If it had distributed ₦300,000,000 or more by the end of 2025 (12 months after the year end), the income would be exempt.
Example 3: a mixed REIC. A REIC has rent ₦200,000,000 (all distributed in time) and a gain on sale of a building of ₦50,000,000.
- The rent is exempt.
- The gain of ₦50,000,000 is taxable as it is not rent or dividend.
How to score full marks
- List each tax on real estate with its rate.
- State both conditions for the REIC exemption: 75% and 12 months.
- Apply both tests, moratorium and rate, to each farm loan.
- Define primary agricultural production by its four types.
Common mistakes in the exam
- Treating all REIC income as exempt.
- Using a six-month moratorium for farm loan exemption.
- Comparing the rate to the lender’s deposit rate and not the base lending rate.
- Including processed products in primary production.
Quick revision
- REIC: 75% within 12 months; gains taxable.
- Agriculture: pioneer 4 + 2; tractor duty 5%; loans 12 months and base rate.
Practice questions
Questions 1 to 10 are multiple choice. Questions 11 to 13 are written. Try each before opening the answer.
Question 1. A REIC must distribute at least:
- 25%
- 50%
- 75%
- 100%
Show the answer
C. 75% of rent or dividend income.
Question 2. The time limit for REIC distribution is:
- 3 months
- 6 months
- 12 months after the year end
- 24 months
Show the answer
C. Not later than 12 months after the year end.
Question 3. Gains of a REIC from disposing assets are:
- Exempt
- Taxable
- Half exempt
- Deducted
Show the answer
B. They are not exempt.
Question 4. Pioneer status for primary agriculture is:
- 2 years
- 4 years plus 2
- 10 years
- No status
Show the answer
B. Initial four years and two more.
Question 5. Tractor import duty falls from:
- 50% to 10%
- 35% to 5%
- 20% to 0%
- 10% to 5%
Show the answer
B. 35% to 5%.
Question 6. Exempt agricultural loan interest needs a moratorium of at least:
- 3 months
- 6 months
- 12 months
- 24 months
Show the answer
C. Twelve months.
Question 7. Withholding tax on rent paid to a company is:
- 5%
- 10%
- 15%
- 20%
Show the answer
B. 10%; 5% to an individual.
Question 8. Stamp duty on conveyance of real property is:
- 75k per ₦200
- 75k per ₦50
- 1% flat
- Nil
Show the answer
B. 75 kobo for every ₦50.
Question 9. Primary agricultural production excludes:
- Raw crops
- Processed products
- Live animals
- Fish
Show the answer
B. Intermediate or final processing is excluded.
Question 10. A cottage industry is:
- Factory-based
- Home-based
- Foreign-owned
- State-owned
Show the answer
B. Products and services are home-based.
Question 11 (10 marks). State the taxes that apply to real estate businesses in Nigeria. (10 marks)
Question 12 (10 marks). Explain the tax treatment of the income of a real estate investment company. (10 marks)
Question 13 (10 marks). State the incentives for companies in primary agricultural production and the conditions for exempt interest on agricultural loans. (10 marks)
Model answers
Show the model answer to Question 11
Income tax (company or personal); withholding tax; tertiary education tax; VAT; land use charge or tenement rate; stamp duty. (1⅓ each) Rates or conditions for each. (2)
Show the model answer to Question 12
Rent and dividend received under a REIS are exempt if at least 75% is distributed within 12 months after the year end. (4) Distributions are allowable and are not subject to withholding tax when paid to a REIC under a REIS. (3) Gains and other income are taxable. (3)
Show the model answer to Question 13
Pioneer status for four years plus two; tractor duty 35% to 5%; application through the Minister of Trade, Industry and Investment. (4) Loan interest is exempt if the moratorium is at least 12 months and the rate is not above the base lending rate. (4) Agricultural companies are exempt from minimum tax. (2)
Pathfinder on Taxation of real estate and agricultural businesses: REICs, farm incentives and loan interest
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.
Revise first: Agricultural business
Source: ICAN Pathfinder, Taxation. Diets covered: May 2026 and November 2025.
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