Real Estate & Property Tax

Introduction: The real estate and property sector has long been a significant contributor to Nigeria’s economy, driving investment, job creation, and infrastructure development. With the passage of the Nigeria Finance Act 2022, the government aims to strengthen the sector and address various challenges to promote sustainable growth. As a reputable accounting firm in Nigeria, we explore the key provisions of the Finance Act 2022 and their potential impact on the real estate and property industry. 1. Capital Gains Tax Reforms: The Finance Act 2022 introduces significant reforms to the capital gains tax (CGT) regime. It expands the definition of “chargeable persons” to include Nigerian citizens residing outside the country, subjecting their gains on the disposal of assets in Nigeria to CGT. This measure broadens the tax base, ensuring that gains made by Nigerian citizens from real estate transactions are subject to taxation, regardless of their residency status. Real estate investors and individuals involved in property transactions should be aware of these CGT reforms to comply with the updated tax obligations. 2. Stamp Duty on Tenancy Agreements: The Finance Act 2022 introduces stamp duty on tenancy agreements for residential and commercial properties. Tenants and landlords must now pay stamp duty on tenancy agreements to formalize their rental arrangements. This measure aims to enhance revenue collection for the government and ensure that rental income in the real estate sector is subject to appropriate taxation. 3. Real Estate Investment Trusts (REITs) Incentives: The Finance Act 2022 extends tax incentives to Real Estate Investment Trusts (REITs) to promote investment in the real estate sector. REITs are investment vehicles that pool funds from multiple investors to invest in real estate projects. The Act’s provisions incentivize investments through REITs by providing tax advantages to both the trust and individual investors. These incentives are likely to attract more capital into the real estate market and facilitate the development of new projects and properties. 4. Capital Allowances and Deductions: The Finance Act 2022 introduces measures to incentivize investments in the real estate and property sector by providing capital allowances and deductions. Businesses investing in real estate projects can claim deductions on qualifying expenses and depreciate assets more rapidly, reducing their overall tax burden. These capital allowances and deductions encourage real estate developers to modernize and expand their properties, leading to increased supply and potentially more affordable housing options. 5. Property Tax Reforms: The Finance Act 2022 empowers state governments to collect property taxes and revise property valuation. The Act encourages state governments to implement efficient and transparent property tax systems, promoting better revenue generation at the state level. The reforms aim to standardize property valuations and increase the collection of property taxes to support local infrastructure and services. Conclusion: The Nigeria Finance Act 2022 introduces several provisions that impact the real estate and property sector. From CGT reforms to stamp duty on tenancy agreements and incentives for REITs, the Act aims to enhance tax revenue collection and promote sustainable growth in the real estate market. As a leading accounting firm in Nigeria, we advise real estate investors, developers, and stakeholders to stay informed about the Act’s provisions and seek professional guidance to navigate the evolving tax landscape. By understanding and complying with the Finance Act 2022, the real estate and property sector can thrive and contribute significantly to Nigeria’s economic development and prosperity. For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at www.sunmoladavid.com. You can also reach us via WhatsApp at +2348038460036.