The infrastructure and real estate construction industry in Nigeria holds the potential for contributing massively to the growth of the economy, both in terms of GDP and employment generation. The reason is not farfetched- her population. Nigeria has an estimated population of 200 million people majority of which are youths.

However, in Nigeria, there is a significant shortfall in critical public infrastructure and housing deficit due to rapid population and urban growth, poor land registration and property registration, etc. In a bid to address the infrastructure deficit in Nigeria, the Federal Government at one time or another has rolled-out several sectoral policies. For instance, in January 2019, the Federal Government introduced the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme. Also, earlier in 2017, the Securities and Exchange Commission (SEC) introduced Regulations for the operation of a Real Estate Investment Scheme (REIS) in Nigeria. With an option in the Regulations, for a REIS to be set up either as:

  • A Trust (Real Estate Investment Trust – “REIT”) or
  • Company (Real Estate Investment Company – “REICO”)

REISs are investment vehicles that pool funds from investors for investments in infrastructure and real estates, such as airports, housing, shopping malls, etc. as an asset class. From the regulation, REISs are to be established to acquire, develop and hold portfolios of real estate assets.

However, the problems persisted primarily because Real Estate Investment Companies (REICs), were liable to Corporate Income Tax (CIT) at 30% of their profits, plus a 2% Tertiary Education Tax (TET). In addition, the Dividends of REIC’s and the distribution of the dividends to the shareholders respectively were liable to Withholding tax (WHT) at 10%. This is contrary to how real estate investment trusts (REITs) globally are treated as tax neutral vehicles. Thus, the tax liability of these REIC makes investing in them unattractive to potential investors.


The new Finance Act has introduced several changes. Section 105 (1) of CITA as amended by the new Finance Act defines a REIC as a “Company duly approved by the Securities and Exchange Commission (“SEC”) to operate as a Real Estate Investment Scheme in Nigeria”. The SEC Rules clearly define the scope and regulatory requirements for a Real Estate Investment Scheme (REIS) in Nigeria

One very important change made by the amendment is in the area of corporate taxation. Section 23(1) of the Company Income Tax (CITA) as amended by the new Finance Act provides to the effect that “the dividend and rental income received by a real estate investment company (REICs) on behalf of its shareholders” shall be exempted from Company Income Tax (CIT) “provided that a minimum of 75 percent of dividend and rental income is distributed “within 12 months from the end of the financial year in which the dividend or rental income was earned.” It is also believed that REIC’s are now exempted from TET, this is because the assessable profits of REIC’s is the basis for TET computation.

The amendment further provided that where the REIC fail to distribute the dividend or rental income within the stipulated 12-month period, the income would be subject to CIT and TET. Also, management fees, profits or any other income earned for and on the REIC’s account would be subject to CIT and TET.

Another change is in the area of Withholding Tax (WHT). Section 81(2) of the amendments in the Finance Act introduces a maximum of 2.5% rate for withholding tax chargeable to road, bridges, building and power plant construction contract (excluding survey, design and deliveries). Recall that in November 2016 by a Ministerial Order issued pursuant to Section 81 of the CITA, the WHT rate applicable to building construction was fixed at 5%.

Section 80(5)(a) of CITA as amended in the Finance Act also exempts the distributions to REIC from Withholding Tax (WHT). Therefore, where a REIC is a shareholder in a company, the company must pay gross dividends to the REIC without first deducting WHT. However, section 80(6) as amended in the Finance Act expects that the REIC would then deduct WHT when distributions are being made to its unitholders. This eliminate double taxation and ensures that only the profits of investor’s investments made through REICs are subject to WHT and not the profits of REIC’s.

Although under the new tax regime, REICs are now treated as tax neutral vehicles, but for a Property owned by REIC, if it is transferred or sold off or disposed of, the distribution of the disposal proceeds of the property to shareholders would be exposed to WHT charges.


Due to the rapid population and urban growth in Nigeria, the need for infrastructure and affordable housing has become urgent and has reached critical status. To solve these challenges will require innovation in new models for land acquisition, a business friendly tax regime as well as deliberate Public Private Partnership.

Thus with the present tax regime made possible by the enactment of the Finance Act 2019, it would make REICs more attractive both from a legal perspective and economic perspective as it has the potential to attract huge investments from the public and also mobilise more funds for real estate projects with a corresponding positive impact on the capital market and the economy both in terms of jobs and GDP growth.


Onwuchekwa Obinna Agwu, Esq. He can be reached via or +2348038849943.