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The short answer
For a South African tax resident, a gain or loss on a naira asset bought and sold in naira is worked out in naira first and then translated into rand at the average rate for the year of sale or the spot rate on the sale date, under paragraph 43 of the Eighth Schedule. Exchange differences are not counted separately, so a naira devaluation that wipes out your rand value does not create a capital loss, and a naira gain can be taxable even when you lost in rand.
Why this catches people out
Many Nigerians in South Africa own land, a flat or shares bought in naira years ago. The naira has lost a large part of its value against the rand since then, so when they sell, the rand they receive can be far below the rand they spent. It feels like a loss. SARS's capital gains rules for individuals do not see it that way when both the cost and the proceeds are in naira.
The paragraph 43 rule
The Tax Faculty's note by Piet Nel (February 2021) summarises paragraph 43 for natural persons and non-trading trusts:
- Same currency
- Cost and proceeds both in naira: calculate the capital gain or loss in naira, then translate the result to rand at the average exchange rate for the year of disposal or the spot rate on the disposal date. "No exchange differences will then apply."
- Different currencies
- Cost in one foreign currency and proceeds in another: translate proceeds at the average or spot rate for the disposal, and expenditure at the average or spot rate for when it was incurred, then compute the gain.
For most naira property and shares, the same-currency rule applies. The effect is that only the movement in the asset's naira price matters. The naira's fall against the rand affects how big the rand figure is, but not whether you have a gain or a loss.
Worked example: a rand loss, a SARS gain
Example only, with illustrative exchange rates. In 2018 you bought a plot for ₦20,000,000 when R1 = ₦25, so it cost you R800,000. In 2026 you sell for ₦40,000,000 when R1 = ₦85, receiving R470,588.
| Measure | Calculation | Result |
|---|---|---|
| Your rand experience | R470,588 − R800,000 | R329,412 lost |
| Naira gain | ₦40,000,000 − ₦20,000,000 | ₦20,000,000 |
| Paragraph 43 gain in rand | ₦20,000,000 ÷ 85 | R235,294 capital gain |
Under the same-currency rule the R235,294 gain goes into your capital gains calculation, before the annual exclusion and inclusion rate, even though you have fewer rand than you started with. Check: 40,000,000 ÷ 85 = 470,588; 20,000,000 ÷ 85 = 235,294.
The reverse also holds. If the plot had sold for ₦18,000,000, you would have a naira loss of ₦2,000,000, translated to a capital loss of about R23,529 at the same rate, and that is the loss SARS recognises, not the much larger rand fall.
Points that change the answer
- Assets held before you became SA resident. Special rules apply to assets owned when you became resident; ask a practitioner how the base cost is set in your case.
- Assets bought in one currency, sold in another. If you bought shares in dollars and sold for naira, the different-currency rule applies and exchange movements do enter the calculation.
- Cash and deposits. The Tax Faculty note mentions deposits denominated in money but does not set out how currency movements on naira bank balances are taxed. Get advice before claiming any loss on naira cash.
- Nigerian tax. Nigeria taxes gains on Nigerian assets too. Any Nigerian tax proved payable may be creditable under section 6quat (SARS Interpretation Note 18), limited to the SA tax on that gain.
- Rental or interest income is income, not a capital gain, and has its own rules; see declaring Nigerian rent to SARS.
Choosing and recording the exchange rate
Paragraph 43 lets you use either the average rate for the year of assessment in which you sell or the spot rate on the day of disposal. The choice changes the rand figure, sometimes by a lot when the naira is moving quickly, so pick one method, write down where the rate came from and use it consistently across your return. Keep a screenshot or printout of the published rate for the date you used. If SARS later queries the gain, a clear note of the method is the quickest way to settle it.
Bringing the proceeds into South Africa does not change the calculation. The gain is fixed at the date of sale; converting naira to rand later can give you a better or worse rand amount, but that later conversion is a separate event. Keep the conversion records anyway, because your SA bank will ask where the money came from and you may need to show it is sale proceeds already taxed.
Records to keep
- The purchase agreement, receipts and title documents showing the naira cost and date.
- Receipts for improvements, legal fees, survey and Governor's Consent costs, each dated.
- The sale agreement and the bank credit showing naira proceeds and date.
- The exchange rate used (average for the year or spot on the date) and where it came from, applied consistently.
- Any Nigerian tax paid on the sale, with the receipt from the tax authority.
- The South African bank records of money sent to Nigeria and brought back, with the balance of payments reason codes.
For property, our guide to SARS capital gains on Nigerian property walks through the return. This is information, not tax advice.
Where Pryme fits
A clean paper trail is most of the work. Any Pryme customer can generate a regular or verifiable statement or receipt through VerifyDoc.ai, and anyone can check a verifiable one is genuine and unaltered (receipts). If you bring sale proceeds out, Swap shows the rate first and the fee on its own line, so each conversion has a dated record.
Questions people ask
Can I claim a capital loss from the naira devaluation?
Generally not when the asset was bought and sold in naira. Paragraph 43 calculates the gain or loss in naira first, so exchange movements are excluded.
Which exchange rate does SARS use for a naira gain?
Under the same-currency rule, the average rate for the year of disposal or the spot rate on the disposal date, applied to the naira gain or loss.
Do I pay SARS tax if I sold Nigerian land for less in rand than I paid?
You can, if the naira sale price is higher than the naira cost. The naira gain is translated to rand and included.
What records do I need for a Nigerian asset sale?
Purchase and sale agreements, receipts for costs, the exchange rates used and their source, Nigerian tax receipts and your SA bank transfer records.
Sources
- The Tax Faculty: Assets disposed of in foreign currency, Piet Nel (3 Feb 2021) · accessed Oct 2026
- SARS: Interpretation Note 18 (Issue 5), rebate and deduction for foreign taxes on income (9 Dec 2022) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.