FIRS and Real Estate Transactions: Understanding VAT and Capital Gains Tax in Nigeria.

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Real estate transactions in Nigeria are subject to various tax obligations, and understanding the tax implications is crucial for both buyers and sellers. The Federal Inland Revenue Service (FIRS) plays a significant role in regulating and collecting taxes related to real estate transactions. In this article, we will delve into two essential taxes in the context of real estate: Value-Added Tax (VAT) and Capital Gains Tax (CGT) and provide insights into how they affect real estate transactions in Nigeria.

Value-Added Tax (VAT) in Real Estate:

VAT is a consumption tax levied on the value added to goods and services at each stage of production or distribution. In real estate, VAT primarily impacts the supply of services related to immovable property, including:

  1. Property Lease and Rent: VAT is charged on the lease or rent of commercial properties in Nigeria. Residential properties are generally exempt from VAT.
  2. Construction and Renovation Services: VAT is applicable to the cost of construction, renovation, and repair services provided by contractors, including materials and labor.
  3. Real Estate Agency Fees: Real estate agent commissions are subject to VAT.
  4. Transfer of Land or Property: VAT may apply to the sale of developed or undeveloped land, depending on the circumstances.

It is essential for both buyers and sellers to understand their VAT obligations during real estate transactions. Sellers are typically responsible for collecting VAT from buyers and remitting it to the FIRS. Buyers, on the other hand, should ensure that VAT is properly accounted for in the transaction to avoid future tax liabilities.

Capital Gains Tax (CGT) in Real Estate:

Capital Gains Tax (CGT) is a tax imposed on the gains or profits made from the disposal or sale of assets, including real estate. In Nigeria, CGT is relevant to real estate transactions as follows:

  1. Sale of Real Property: When selling a property, the seller is liable to pay CGT on the gain realized from the sale. The gain is calculated as the selling price minus the cost of acquisition and any allowable expenses related to the sale.
  2. Exemptions: Certain transactions may be exempt from CGT, such as the sale of one’s only or main residence and transactions between family members.
  3. Rate: The current CGT rate for individuals is 10%, while companies are subject to a rate of 20%.
  4. Filing and Payment: Sellers are required to file a CGT return with FIRS within 90 days of the property’s sale and remit the tax due.

Compliance and Professional Advice:

Compliance with VAT and CGT regulations in real estate transactions is essential to avoid potential penalties and legal issues. Here are some key considerations:

  1. Professional Advice: Engage tax professionals or accounting firms with expertise in Nigerian tax laws to assist with the tax aspects of real estate transactions.
  2. Document Everything: Maintain accurate records of all financial transactions and related expenses to support calculations for VAT and CGT.
  3. Due Diligence: Conduct due diligence on the tax status of the property, including any outstanding tax liabilities, before purchasing real estate.
  4. Exemptions and Allowable Deductions: Be aware of potential exemptions and allowable deductions that can reduce your tax liability.
  5. Compliance Timelines: Adhere to FIRS deadlines for filing VAT and CGT returns and remitting taxes.


Navigating the tax implications of real estate transactions in Nigeria involves understanding and complying with VAT and CGT regulations. Whether you are buying or selling real estate, it’s crucial to be aware of your tax obligations, seek professional advice when needed, and maintain meticulous records to ensure compliance with FIRS requirements. Proper tax planning and compliance contribute to a smoother and legally sound real estate transaction process in Nigeria.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.