The End of the Flat Rate: What Nigeria's Capital Gains Overhaul Means for Founders and Investors

Circle LLP · September 2026

A different arithmetic for every exit

For decades, capital gains in Nigeria were taxed at a flat 10%. That rate was low and predictable, and it shaped how founders priced secondary sales, how investors modelled returns and how groups planned their exits. On 1 January 2026, the Nigeria Tax Act 2025 replaced it. Gains are now folded into the general income tax regime: individuals pay at their personal income tax rates, and companies at the corporate rate.

The headline is a higher rate. The more consequential change is that the outcome of a disposal now depends on who sells, how much they sell in a year, where the shares sit and whether the proceeds are reinvested. Transactions that were straightforward under the old regime now reward planning and penalise its absence.

What changed

The Nigeria Tax Act repealed the Capital Gains Tax Act and moved chargeable gains into the main income tax computation. The effect differs sharply by type of seller.

Individual

Before 1 January 2026: Flat 10%

From 1 January 2026: Gains added to income and taxed at personal rates of 0% to 25%

Company

Before 1 January 2026: Flat 10%

From 1 January 2026: Corporate rate of 30%; 0% for qualifying small companies

Shares in a Nigerian company

Before 1 January 2026: Exempt where 12-month proceeds were below NGN 100 million

From 1 January 2026: Exempt only where proceeds are below NGN 150 million and gains do not exceed NGN 10 million

For individuals, the top rate of 25% applies to income above NGN 50 million a year (PwC). Because gains are aggregated with salary and other income, a founder's exit gain will in practice be taxed almost entirely at the top band. For corporate holders, the rate has tripled. Residents are also now taxed on worldwide gains, and the Act extends residence to individuals with strong economic or family ties to Nigeria (EY).

The share exemption has two tests, not one

The most widely misread provision is the share exemption in section 34 of the Act. Gains on disposals of shares in a Nigerian company are exempt only where aggregate proceeds over any 12 consecutive months are below NGN 150 million and the chargeable gains do not exceed NGN 10 million. Both conditions must be met.

The second test is the one that catches founders. A sale of NGN 40 million of shares acquired for NGN 5 million clears the proceeds threshold comfortably, but a NGN 35 million gain fails the gains test. Low-cost founder shares, by their nature, convert most of any sale price into gain. For founders, the exemption is therefore narrower than its headline figure suggests.

A reinvestment relief partly offsets this. Where proceeds exceed the threshold, gains remain exempt to the extent the proceeds are reinvested in shares of the same or another Nigerian company within the same year of assessment. The relief applies only to the portion reinvested, and only to Nigerian companies.

What it means for founders

Secondary sales now carry a real tax cost. A partial sell-down in a funding round, once taxed at 10%, may now cost a Nigeria-resident founder close to 25% of the gain. The size and timing of secondaries matter more, because the exemption tests run over rolling 12-month periods. Splitting a sale purely to stay under the thresholds, however, invites scrutiny under the Act's general anti-avoidance rule in section 191, which lets the tax authority disregard artificial arrangements.

The offshore holding company changes the analysis, not the liability. Many Nigerian-founded businesses sit under a Delaware, Mauritius or UK parent. For a founder resident in Nigeria, gains on those foreign shares are taxable here on a worldwide basis, but the share exemption and reinvestment relief are framed for shares in Nigerian companies. A founder who assumes the NGN 150 million exemption covers a Delaware exit may be mistaken. Unilateral credit for foreign tax is available, but the United States has no comprehensive tax treaty with Nigeria.

Indirect transfers are now in scope. Non-residents are taxed on gains from disposals that change the ownership of a Nigerian company or of assets located in Nigeria, which brings offshore share sales by foreign co-founders and investors into the Nigerian net (section 47).

What it means for investors

Corporate investors face the steepest change. A Nigerian company or fund vehicle holding shares now pays 30% on gains rather than 10%. Return models built before 2026 overstate net exits and should be rerun, particularly for long-dated positions where most of the value is gain.

The startup exemption becomes more valuable. Section 163(m) of the Act carries forward the Nigeria Startup Act's exemption for angel investors, venture capitalists, private equity funds, accelerators and incubators on gains relating to labelled startups, where the assets have been held in Nigeria for at least 24 months. With the general rate now at 25% or 30%, holding through a company that has obtained its startup label from NITDA is worth materially more than it was. For investee companies that have not yet considered the label, the cost-benefit calculation has changed.

Venture capital vehicles lose a legacy regime. The Act repealed the Venture Capital (Incentives) Act, so qualifying venture capital companies now fall under the general rules for new disposals.

Questions worth revisiting

The new regime does not call for the same response from every business, but it does make several long-settled assumptions worth testing again:

• Is the group's holding structure still efficient for Nigeria-resident founders and investors, now that offshore gains are taxed at income rates with no share exemption?

• Do shareholder agreements and term sheets allocate the tax cost of secondaries, drag-along sales and indirect transfers?

• Would a startup label, or a reinvestment plan, materially change expected after-tax returns?

• Are exit and fundraising models using post-2026 rates?

The flat rate rewarded simplicity. The new regime rewards foresight: the tax outcome of an exit is now largely decided by choices made years before it.

General Information, not legal advice.

Sources

• EY, Nigeria Tax Act 2025 has been signed: highlights (June 2025)

• PwC Worldwide Tax Summaries, Nigeria: taxes on personal income (reviewed May 2026)

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