Effects of the 2020 Finance Bill on Real Estate

Dolapo Omidire . 3 years ago

Effects of the 2020 Finance Bill on Real Estate

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Article Summary: In January 2020, the President signed the new Finance Bill into law. At the time, we summarised the implications for Nigeria's real estate in a Twitter thread, here they are: The #FinanceBill will exempt dividend & rental income received by Real Estate Investment Companies (REIC) on behalf of its unitholders from CIT, provided a minimum…


In January 2020, the President signed the new Finance Bill into law. At the time, we summarised the implications for Nigeria’s real estate in a Twitter thread, here they are:

  • The #FinanceBill will exempt dividend & rental income received by Real Estate Investment Companies (REIC) on behalf of its unitholders from CIT, provided a minimum of 75% of dividend/rent earned is distributed within 12 months of the end of the financial year the income was earned.
  • Dividends paid & mandatory distributions by REICs will be treated as tax-deductible expenses. This is to prevent a double-dip situation by exempting income from dividends & rental income, from tax. Tax will now be treated on the distributions and not the income.
  • Since the dividend received and rental income of REIC’s are exempted from tax, they will not form part of the assessable profits which is what Tertiary Education Tax (TET) is based on.
  • Where a REIC is a shareholder of a company distributing dividends, the company is to pay gross dividends without deducting withholding tax (WHT) from it. This is done in a bid to prevent double taxation as WHT will still be charged when the REIC is making its distribution.
  • The finance bill aims to make Real estate Investment Companies (REIC) attractive by removing double taxation and placing taxation only on their respective shareholders.
  • Historically, the focus has been on Real Estate Investment Trusts (REITs), and the Securities Exchange Commission defines REICs and REITs as Real Estate Investment Schemes according to The Investment and Securities Act, 2007.

It is unclear whether these updates will affect the 3 listed REITs on the Nigerian Stock Exchange. List of acronyms: REIC: Real Estate Investment Company. REIT: Real Estate Investment Trust. CIT: Companies Income Tax. TET: Tertiary Education Tax. WHT: Withholding Tax.

Download the 2020 Finance Act.

Download the amendment to the Finance Act here.