Nigeria’s 2024 Tax Bill proposes taxing indirect transfers of shares and interests where 50% or more of the value comes from Nigerian assets, affecting both resident and non-resident investors. With a 10% CGT rate, exemptions for gains below N10 million, and reliefs for reinvestments or group transfers, the regime introduces new compliance and valuation challenges. This guide explains the rules, provides practical examples, and offers steps to minimize tax exposure.
Nigeria’s proposed Tax Bill for 2024 expands the Capital Gains Tax (CGT) framework to capture gains from indirect transfers of shares and interests tied to Nigerian assets, as outlined in a recent UUBO analysis. Aimed at taxing offshore transactions, this reform impacts investors in sectors like oil, real estate, and technology. Below, we explain the key provisions, illustrate with examples, and provide actionable strategies to navigate this evolving landscape as of June 11, 2025.
What Is the Proposed CGT Regime?
The current Capital Gains Tax Act taxes gains from direct asset sales, like shares in Nigerian companies, at 10 percent. The 2024 Tax Bill extends this to indirect transfers—sales of foreign entities where at least 50 percent of their value derives from Nigerian assets, such as real estate or mineral rights. This ensures offshore deals contribute to Nigeria’s tax revenue, affecting both local and global investors.
Key Features of the Proposed CGT Regime
Scope: Direct and Indirect Transfers
Direct transfers, like selling shares in a Nigerian tech startup, remain taxable at 10 percent. The new regime targets indirect transfers, such as selling shares in a UK company whose value largely comes from a Nigerian oil block.
Taxable Gain Calculation
Gains are the sale proceeds (money received from selling an asset) minus the cost base (purchase price plus costs like legal fees). For indirect transfers, only the gain tied to Nigerian assets is taxed. For example, if 60 percent of a foreign entity’s value is from Nigerian assets, only 60 percent of the gain is taxable.
Exemptions and Reliefs
Small gains below N10 million (about $6,000 at $1 = N1,500) are exempt, helping smaller investors. Rollover relief defers tax if proceeds are reinvested in similar assets within 12 months. Group relief exempts transfers within a corporate group if conditions, like retaining 25 percent ownership, are met.
Compliance Requirements
Investors must file a self-assessment return within six months of the transaction. Non-residents face the same rules, with penalties for late or incorrect filings, including a 10 percent surcharge plus interest. The Federal Inland Revenue Service may issue assessments if returns are missing.
Key Takeaway: Non-residents selling foreign entities with Nigerian assets, like oil blocks, could face a 10% CGT on gains tied to Nigeria. Early valuation and local expertise are critical to avoid penalties.
Practical Examples for Investors
Consider Chika, a Nigerian investor who buys shares in a Lagos fintech firm for N30 million, including N1 million in fees. She sells them for N50 million, earning a N20 million gain. She owes N2 million in CGT and must file a return within six months.
Next, imagine John, a U.S. investor, selling shares in a UK company for $100 million (N150 billion at $1 = N1,500). The company’s Nigerian oil block accounts for 70 percent of its value, with a cost base of $60 million (N90 billion). The gain is $40 million (N60 billion), but only 70 percent ($28 million or N42 billion) is taxable, resulting in a N4.2 billion CGT liability. John needs local tax expertise to comply.
Aisha, a UK-based individual, invests $10,000 in a global fund with 60 percent Nigerian real estate value. She sells her stake for $15,000, generating a $5,000 gain (N7.5 million). Since this is below N10 million, she owes no CGT but must file to confirm the exemption.
For rollover relief, a company sells Nigerian real estate for N100 million, with a N70 million cost base, yielding a N30 million gain. By reinvesting in another property within 12 months, it defers the tax, provided reinvestment is documented.
Finally, a foreign parent transfers a Nigerian subsidiary’s shares, valued at N200 million with a N150 million cost base, to a group entity while retaining 30 percent ownership. The N50 million gain is exempt under group relief if conditions are met.
Currency Note: Examples use $1 = N1,500, but Nigeria’s exchange rate fluctuates. Verify current rates when calculating gains, as shifts can impact tax liabilities.
Implications for Investors
The regime increases tax exposure for offshore deals in sectors like oil or real estate, potentially reducing deal profitability. Valuing Nigerian assets, especially intangibles, requires professional expertise, adding costs. Double taxation risks arise without clear tax treaties, so investors should leverage Nigeria’s agreements. Non-residents may face compliance challenges, necessitating local advisors. However, structuring deals for reliefs or keeping gains below N10 million can reduce tax burdens.
Challenges to Anticipate
Valuing Nigerian assets, legislative uncertainty as the Tax Bill awaits approval, and compliance costs for non-residents pose challenges. Investors should budget for these and monitor updates to plan effectively.