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You have worked hard to build your wealth. As an investor, chances are your investment portfolio is not sitting idle—it’s working just as hard as you are. Whether it’s through commercial papers, treasury bills, fixed-income deposits, or more complex structured products, the goal is the same: capital preservation and growth.
But while many investors obsess over returns and risk, one thing often gets overlooked – Taxes. And if you’re not paying attention to it, this could quietly eat into your gains.
Let’s break it down—what taxes should every investor be aware of in Nigeria, and how can you stay tax-smart without missing opportunities?
1. Withholding Tax:
Let’s start with the one you may have already seen reflected in your income: withholding tax (WHT). This is a tax deducted at source—meaning before you even receive your earnings—on income like interest, dividends, or royalties. WHT serves as an advance payment of income tax, meaning investors can offset it against their total tax liability when filing annual returns.
- What’s the rate? Typically, 10% on interest earned for both individuals and corporate investors.
- Who does the deducting? The company paying you—typically a bank or corporate issuer—automatically deducts the tax and remits it to the tax authority to which an investor resides.
- Exemptions: Interest earned on Federal Government securities (like treasury bills and FGN bonds) is WHT-free.
- Note: If your business earns under ₦25 million in turnover, you are considered a “small company” and will also be exempt from WHT.
Smart Investor Move: Consider allocating part of your portfolio to tax-exempt federal securities. The yields might be slightly lower, but the tax savings could make up for it.
2. Capital Gains Tax:
Capital Gains Tax (CGT) comes into play when you sell an asset such as stocks, bonds, real estate and make a profit. In Nigeria, CGT is charged at 10% when the gross proceeds from disposal in any 12 consecutive months is N100 MILLION and above.
But here’s the nuance:
- What’s taxed? Profits from selling most capital assets.
- What’s not? Gains from selling Nigerian government securities, stocks, and shares are exempt from CGT.
That means if you offload some shares in a Nigerian company and walk away with a tidy gain, you won’t owe a thing in CGT. However, gains from private placements or non-listed instruments? Is a different story.
Smart Investor Move: Long-term investments in government-backed or listed securities could give you peace of mind—returns without the CGT burden. And if you’re planning to realize a gain, consider reinvesting in tax-exempt assets to soften the impact.
3. Value-Added Tax:
You won’t find VAT slapped directly on your profits, but it’s very much part of the investment landscape. It shows up in fees—brokerage charges, advisory costs, and transaction fees.
- The rate? Currently 7.5%.
- Where it applies: When you pay for financial services or professional advice.
- Where you’re safe: Capital market trades themselves—like buying or selling shares—are VAT exempt.
Smart Investor Move: Factor in VAT when comparing the total cost of investment products, especially those involving advisory or management fees to avoid unexpected charges. Sometimes, the cheaper option on paper might end up costing more after VAT.
4. Stamp Duties: Small Charges That Add Up
Stamp duties in Nigeria may feel modest, but they’re real and recurring—especially if you move large sums or transfer securities.
- Electronic transfers: Deposits over ₦10,000? That’s a ₦50 charge right there.
- Securities transfers: Share transfers can attract stamp duty at 0.08% of the transaction value.
Smart Investor Move: If you’re making frequent large transfers or repositioning your portfolio regularly, it pays to map out these costs. Over time, they can add up.
Why This All Matters
Let’s be honest—the real issue isn’t the tax itself; it’s being unaware of how taxes impact your returns.
Tax laws in Nigeria may not be as complex as in other markets, but they still demand attention. Whether you are a High Networth Individual rebalancing a multi-million-naira portfolio or a Corporate Executive managing strategic investments, understanding how taxes work can be the difference between a good return—and a great one.
At Coronation Merchant Bank, we believe investors should have a tax strategy that’s as robust as their investment strategy or portfolio. The two should go hand-in-hand. This doesn’t mean evading taxes, it means being a good tax planner, smart, compliant, and intentional with how your wealth is structured.
Speak to a wealth manager today at pbg@coronationmb.com or call us on 0201279640 or 02012797641 to get started on tax planning.
The best investment decisions are not just about what to buy—but how to buy it smartly.
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