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Having many stocks in your portfolio doesn’t necessarily mean you owe a lot of taxes; you only start paying taxes on your stocks when you sell them to make a profit.
The amount to be paid depends on a plethora of factors that the perspicacious investors need to be conversant with so as to maximise their returns.
Stocks are subject to taxes
Depending on the income earned, filing status, and the duration of time stocks are held onto, an investor pays capital gains tax when he disposes of or sells a stock.
It is important to note that taxes are paid on dividends, which are income paid to shareholders from distributable profit of the company that they have taken the risk to invest in.
Dividends are taxed
The relevant authority threatens stocks and dividends as assets such as buildings, cars and what else you know. Just these assets could be sold at a gain or a loss, the price of stocks goes up and comes as they are not static; and the changes in these stocks are unrealised gains, however, when they are sold, they become realised gains or losses, which are subject to the capital gains tax.
Capital gains tax rates as amended in 2025
Capital Gains Tax is governed by Capital Gains Tax Act, Cap C1 LFN 2004 (as amended). Capital Gains Tax is charged at a flat rate of 10% of chargeable gains. All chargeable assets are subject to Capital Gains Tax when disposed at a gain, except those specifically exempted by the Act Chargeable assets include all forms of property whether or not situated in Nigeria.
The due date for filing return and payment of the tax is the same as in Companies Income Tax. Allowable expenditure for the purpose of CGT includes fees, commissions or remunerations paid for professional services and cost of transfer.
The new Tax Reforms Act singed by the president says capital gains tax now applies to disposals of digital and virtual assets, such as cryptocurrencies, tokens, and digital property.
Reliefs are available for reinvested share sales, principal private residences, and certain personal-use assets. Notably, gains on share disposals below ₦150 million (subject to a ₦10 million gain limit) are exempt.
Capital loss
When an investor loses money on stocks sold, he incurs capital loss that is not taxable, and it could be netted off future gains.
For example, if you bought 20 shares of Geregu at N1000 each using a brokerage account that charges 5% commission, your cost basis is (N100*20)+(5%*2000)= N21,000.
Let’s say he decided to sell the 20 shares for N600 each. He will be getting N12,000 on the sales. Therefore, his capital loss will be (N20000-N12,000=N8000).
It is noteworthy that capital losses are not taxed, rather, they are netted off future gains.
An investor pays taxes on stock only when he sells them for a profit, some may decide to hold the stock to avoid paying the compulsory level, but it depends on investment strategy.
How are dividends taxed?
A dividend is a sum of money paid regularly (typically annually) by a company to its shareholders out of its profits (or reserves). You only pay taxes on dividends when you sell them and it does not have anything to do with the stock sold since both are incomes that make up total investments.
How the intelligent investor eludes capital gains tax
Since, you are mandated to pay capital gains tax when you sell, it is advisable you hold on to the stock; but all depends on whether you invest for the short or long term.
In conclusion, an investor only pays capital gains tax when he sells his shares to make a profit, and when he makes a loss from such disposal, he could net the deficit with future gains. Also taxes are paid on dividend when they are received.
It is imperative that you consult an adroit tax practitioner who has a knowledge of tax planning that will help reduce liabilities.
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