CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Issues of tax compliance have been a challenge for the successive government in Nigeria including various taxes on real estate property transaction. There are various taxes that apply to real estate or real property transactions in Nigeria. The common public representation or perception that there are no real property or real estate taxes in Nigeria is not correct. Some of the common taxes that apply to real property transactions in Nigeria include the company’s income tax, value added tax, capital gains tax and stamp duties tax. Any income with the resulting profit earned by any person from such income, whether such a person is a corporation or an individual, from a property transaction, is liable to the payment of tax. Where the income earner is a corporation, the corporate tax rate in Nigeria is thirty per cent (30%) of the annual profit of the corporation; and where the income earner from a property transaction is an individual or a registered business enterprise or partnership, the graduated tax rate is twenty-four per cent (24%) for individuals earning N3,200,000 and above, per annum (Nwosu, 2004). In addition to paying Companies Income Tax, incorporated corporations in Nigeria, engaged in any commercial activity, including real estate or real property transactions from which they make a profit, are liable to pay two per cent (2%) of such profit as Education tax to the Education Trust Fund. This Tax is collected on behalf of the Education Trust Fund by the Federal Inland Revenue Service (“FIRS”). All goods and services in Nigeria, including goods and services utilized in the real estate industry, are liable to be invoiced and to the payment of Value Added Tax (“VAT”) at the rate of five per cent (5%) of the value of such real estate goods and services. The Capital Gains Tax Act provides that any time an asset, including a real estate asset, whether situated in Nigeria or outside of Nigeria, is disposed o by a Nigerian tax payer, and a gain is derived as a result of such disposal, the resulting gain or profit shall be liable to a ten per cent (10%) Capital Gains Tax (“CGT”) less such allowable expenditures that were utilised to enhance or preserve or defend the title to the asset.