What is Capital transfer tax in Nigeria?

Capital Transfer Tax (CTT) in Nigeria is a tax levied on the transfer of certain types of assets, including real estate and shares, between individuals or entities. It is designed to generate revenue for the government and to ensure a fair distribution of wealth within the country.

Key Points about Capital Transfer Tax in Nigeria:

1. Transferable Assets:

Capital Transfer Tax applies to various assets that are transferred, such as:

- Real estate (land, buildings, and other immovable property)

- Shares in a Nigerian company

- Business assets and goodwill

- Intellectual property (patents, trademarks, copyrights)

- Certain types of life insurance policies

2. Tax Rates:

The CTT rates in Nigeria are progressive, meaning the tax rate increases as the value of the transferred asset increases. The tax rates range from 0% to 10%, depending on the relationship between the transferor (person making the transfer) and the transferee (person receiving the asset).

- For transfers between spouses, the tax rate is 0% regardless of the value.

- For transfers between parents and children, the tax rate starts at 5% for amounts up to 1 million Naira and gradually increases to 10% for amounts above 10 million Naira.

- For transfers between siblings or other close relatives, the tax rate starts at 10% for amounts up to 1 million Naira and increases to 15% for amounts above 10 million Naira.

- For transfers to non-relatives or unrelated parties, the tax rate starts at 15% for amounts up to 1 million Naira and reaches a maximum of 20% for amounts exceeding 10 million Naira.

3. Exemptions:

Certain transfers are exempted from Capital Transfer Tax, including:

- Transfers within a family through a will or on intestacy (distribution of assets according to the deceased's wishes or in the absence of a will)

- Transfers to registered charities or non-governmental organizations (NGOs)

- Transfers between corporate entities without any change in ownership or control

4. Tax Computation and Payment:

The CTT is calculated based on the value of the transferred asset at the time of transfer. The transferor is responsible for paying the tax, and the payment is due within 30 days from the date of the transfer.

5. Compliance:

Taxpayers are expected to file a Capital Transfer Tax Return with the Federal Inland Revenue Service (FIRS) within six months of the transfer date. Failure to comply with the tax laws may result in penalties or legal consequences.

It is important to consult with a tax professional or the relevant tax authorities for specific guidance and advice regarding Capital Transfer Tax in Nigeria, as tax laws and regulations may change over time.