AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
A Nigerian REIT gets no US REIT treatment. If the IRS treats it as a foreign corporation, it is a PFIC when 75% or more of its income is passive or 50% of its assets produce passive income. Rent can be passive or active depending on how the property is run, so the answer turns on the REIT's own operations and needs a US adviser.
Nigerian REITs listed on NGX have caught diaspora attention. The Guardian reported in July 2026 that Union Homes REIT was up more than 35% and UPDC REIT more than 41% year to date at end-June 2026. Nairametrics' summary of SEC data put REIT funds at ₦505.64 billion, about 5.8% of Nigerian collective investment assets, in April 2026. For a US taxpayer, the price is only half the story.
A Nigerian REIT is not a US REIT
The US REIT rules, with their dividend treatment, apply to US entities that qualify under US law. A REIT set up under Nigerian SEC rules is a foreign entity. The Guardian article says Nigerian rules require at least 90% of income to be distributed; that shapes Nigerian treatment, not US. In US terms the first question is how the entity is classified: a Nigerian REIT may be a trust or scheme rather than a company, and whether it is treated as a corporation for US tax is a technical question for your adviser.
The PFIC tests applied to property
The IRS instructions for Form 8621 define a PFIC as a foreign corporation that meets either test:
- Income test: 75% or more of gross income is passive income, as defined in section 1297(b).
- Asset test: at least 50% of average assets produce, or are held for, passive income.
Passive income under the PFIC rules generally means the kinds of income in the US definition of foreign personal holding company income: dividends, interest, and in general rents and royalties, unless an active-business exception applies. That exception is the crux for a REIT. A REIT that holds buildings on long leases, with tenants doing most of the work, looks more passive. One that develops, manages, lets and services property with its own staff has a stronger argument that its rents are active.
Look-through
The instructions also apply a look-through rule: a foreign corporation is treated as holding its share of the assets and income of any corporation in which it owns at least 25% by value. Many REITs hold property through subsidiaries, so the test looks at the property companies too, not just the listed vehicle.
What to check in the REIT's documents
- The latest audited accounts: split of income between rent, interest on cash and money market holdings, and gains.
- How much of the REIT's assets are cash, T-bills or money market investments. Liquid holdings are passive and count against it under the asset test.
- Who manages the properties: the REIT's own staff, a related manager, or tenants on full repairing leases.
- Whether it is a company or a trust, and its subsidiaries.
- Whether the manager will provide a PFIC Annual Information Statement (needed for a QEF election).
| Feature | Points towards PFIC | Points away |
|---|---|---|
| Income mix | Mostly interest and passive rent | Mostly rent from actively managed property |
| Assets | Large cash and money market holdings | Mostly operating property |
| Management | Outsourced, long leases | Own staff letting and servicing |
If it is a PFIC
The default section 1291 regime taxes excess distributions and the entire gain on sale as if earned evenly over your holding period, at top ordinary rates with interest. A REIT that pays out most of its income every year may stay under the 125% excess distribution threshold in steady years, so ordinary distributions may simply be taxed as ordinary income; a sharp rise in payouts or a sale brings the harsher rules in. Listed REIT units may qualify for a mark-to-market election if they are regularly traded on a qualifying exchange. See mark-to-market for listed Nigerian funds and QEF elections.
Worked example (illustrative)
You received $300, $320 and $310 of distributions in the last three years (average $310). This year's distribution is $500. The 125% threshold is $387.50, so $112.50 is an excess distribution, spread over your holding period with an interest charge on earlier years; the remaining $387.50 is taxed in the normal way for the current year.
Alongside the PFIC question
- Units held with a Nigerian broker count towards FBAR and Form 8938.
- Nigerian withholding tax on distributions may count for the foreign tax credit.
- Owning property directly in Nigeria is outside PFIC rules but has its own US reporting; see reporting Nigerian property to the IRS.
Information, not tax advice.
Where Pryme fits
REIT distributions are paid in naira. A Pryme account holds NGN beside USD, and money stays in naira until you choose to convert.
Questions people ask
Are Nigerian REITs taxed like US REITs?
No. US REIT rules apply only to qualifying US entities. A Nigerian REIT is a foreign entity for US tax.
Is a Nigerian REIT a PFIC?
Possibly. If treated as a foreign corporation, it is a PFIC if 75% of income is passive or 50% of assets are passive. Rent may be active or passive depending on operations.
Which Nigerian REITs are listed on NGX?
The Guardian's July 2026 article named Union Homes REIT and UPDC REIT among those listed.
Can I use mark-to-market for Nigerian REIT units?
Only if they count as marketable stock, meaning regularly traded on an exchange meeting the Treasury regulation's tests.
Sources
- IRS: Instructions for Form 8621 (Rev. December 2025) · accessed Oct 2026
- eCFR: 26 CFR 1.1296-2, Definition of marketable stock · accessed Oct 2026
- The Guardian (Nigeria): Nigeria's REITs are quietly outperforming (28 Jul 2026) · accessed Oct 2026
- Nairametrics: Mutual funds hit N8.77 trillion in April 2026 (15 May 2026) · 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.