“Real estate tax figures are not in tune with reality. The government would spend less time chasing people and make more money if the tax rates are reasonable and realistic. All these charges make it expensive to transact in real estate. Prices of real estate properties are high because of all the high tax charges” – Mr Chudi Ubosi, Principal partner, Ubosi Eleh + Co.
Various taxes apply to transactions in real estate in Nigeria. Some of the common taxes are Companies Income Tax, Value Added Tax, Stamp Duties Tax, Capital Gains Tax, State Property Tax which in the case of Lagos transactions include Land Use Charge (and the Federal Capital Territory Property Tax). Tax issues arise based on ignorance of sufferers of property tax payers and negligence of due processes in paying taxes. Tax policies and the position of the law on VAT for example, is not pinpoint clear. There is an argument on whether a sale, transfer or assignment of interest in land should accrue VAT.
Speaking at the NBCC Construction and Real Estate Group Seminar were notable real estate personnel who served as panellists; the conversation was on navigating tax issues in real estate. It was held at The Grand Junction, Landmark Towers, Victoria Island, Lagos.
Panellists at the event were Mr Wole Obayomi, Partner and Head of Tax Regulatory and People Services, KPMG Nigeria, Dr (Mrs) Olateju Abiola Somorin , immediate past President, Chartered Institute of Taxation of Nigeria (CITN), Mr Dayo Ayoola-Johnson, Partner, Adepetun Caxton-Martins Agbor & Segun, Mr Chudi Ubosi, Principal partner, Ubosi Eleh + Co. , Mr Femi Omojola, Chief Operating Officer, Covenant Consultancy Services. Mr Wole Famurewa, Markets Editor, CNBC Africa moderated the discussion.
Double taxation, which is for example, a common tax issue occurs when income is taxed at both the corporate and personal level. Income taxes are paid twice on the same source of earned income. This is of course, a limiting factor to considerable economic gain for new investors in real estate. “Real Estate investments entities can set up a Limited Partnership to avoid suffering double taxation”, Mr Wole Obayomi said. FIRS charges on stamp duty are almost 400% higher than what is required of the law.
Mr Femi Omojola expressed his disappointments towards the lack of incentives for real estate and/or any investors in the country. “Tax rates are too high for new businesses that have barely been around for 5 years”, he lamented. Nigeria is a young country and we do not have up to 500 companies that have enjoyed or are enjoying Pioneer Status tax wise.
Speaking on Companies income tax, withholding tax, VAT and policy reversal, Dr Mrs Olateju was empathetic about the many challenges real estate investors face and said that frequent policy reversals should be avoided as it brings in a lot of confusion.
An Estate Surveyor and Valuer and the current Chairman of the Lagos State Chapter of NIESV, Mr Olurogba Orimolade who represented the NIESV National President, Mr. Patunola-Ajayi expressed his aggravation towards the flawed land use charge. He said that the formula and method used to arrive at the charge are so flawed that they must have been arrived at by people who are not professionals in the industry. Another commentator noted that the tax issues in Lagos state are due to the fact that it is plainly revenue driven instead of being maintained as a tool for fiscal control. He also made mention of the fact that the increase in survey fees is very unrealistic and unwarranted.
Professor Abiola Sanni empathized with the individuals who find it difficult to use their assets for economic gain due to lack of clarity and certainty in the taxing system. He said that assets are as a result, dead and redundant
Mr. Moshood Olajide, Associate Director, Tax and Regulatory Services of PricewaterhouseCoopers Limited gave an enlightening Keynote presentation. It was an overview of real estate transactions. He talked about major tax issues like VAT, Capital Gains Tax (CGT), stamp duty act and withholding tax. “There is some glimpse of hope; we have recognition in the new national policy. We also need to continue to push on the REIT agenda”, he said.
Get all our updates delivered straight to your phone! Click here to download the Nigeria Real Estate Hub Android App on Google Play Store.
– All credits to this site must be clearly stated as nigeriarealestatehub.com