Nigeria's tax landscape has undergone a significant transformation with the introduction of the Nigeria Tax Act 2025, which came into effect on January 1, 2026. The new regime has brought capital gains into the corporate income tax framework, with assessable gains from the disposal of chargeable assets, including shares, subject to a 30 percent tax rate. This represents a substantial increase from the previous 10 percent capital gains tax rate.
The new tax regime has significant implications for companies contemplating mergers, acquisitions, and corporate restructuring. According to the Business Day, companies must now factor a substantially larger potential tax liability into their transaction calculations. The tax consequences of a transaction are no longer determined simply by whether a company is buying or selling, but increasingly depend on how the transaction is structured.
A qualifying merger can be treated as a continuation of the existing businesses rather than a cessation, allowing assets transferred to avoid chargeable gains. Certain unused tax attributes, including losses and capital allowances, can remain available subject to the law's conditions. This creates both an opportunity and a danger, as companies can legitimately structure transactions more efficiently, but tax considerations could begin to dominate decisions that should primarily be driven by economic and commercial logic.
The new regime has sparked concerns over investment, as Nigeria needs capital, corporate expansion, industrial consolidation, and stronger domestic companies. In sectors such as banking, oil and gas, and other capital-intensive industries, mergers and acquisitions can provide a mechanism for raising capital, improving efficiency, preserving jobs, and creating stronger institutions. The banking sector is particularly important given the ongoing recapitalisation exercise.
The cross-border implications of the new regime are equally significant, as it potentially brings certain indirect transfers of shares into the Nigerian tax net. For multinational businesses, this means that a transaction executed outside Nigeria could nevertheless create Nigerian tax consequences. The requirement for businesses to notify the tax authority before restructuring a trade or business adds another layer of compliance, which could increase transaction costs and undermine time-sensitive commercial negotiations.
To mitigate these concerns, the Federal Government and tax authorities should issue clear, practical guidelines explaining how merger relief, asset transfers, tax losses, capital allowances, withholding-tax credits, and cross-border transactions will be treated. The authorities should also establish efficient advance-ruling or pre-transaction clarification mechanisms, enabling companies to understand their tax exposure before committing to major transactions.
Ultimately, Nigeria's tax reform should raise revenue without undermining the investment and restructuring activity that generates that revenue in the first place. The objective should be a tax system that captures its fair share from corporate transactions while giving investors confidence that the rules are stable and understandable. Mergers and acquisitions should remain instruments for building stronger Nigerian businesses, not become tax minefields where companies are forced to choose structures primarily to avoid unexpected liabilities.
Key points
- The new tax regime has introduced complexity in mergers and acquisitions, making corporate transactions more expensive and difficult to execute.
- The regime has significant implications for companies contemplating mergers, acquisitions, and corporate restructuring, and could impact investment in Nigeria.
- Clear guidelines and efficient advance-ruling mechanisms are necessary to mitigate concerns and ensure a stable and understandable tax system.
