Nigeria’s newly consolidated Tax Act (NTA) has introduced sweeping reforms that close long-standing offshore tax loopholes and significantly expand the country’s Capital Gains Tax (CGT) net.
The new provisions now capture indirect transfers of Nigerian assets made through offshore share sales; a move that compels international investors to urgently reassess their holding company (HoldCo) structures and cross-border tax exposure.
Closing the indirect transfer loophole
Until now, foreign investors could avoid paying capital gains tax in Nigeria by selling shares in an offshore holding company that owned Nigerian subsidiaries, rather than selling the Nigerian assets directly.
Femi Wright, Founder and Managing Partner at WYZE, explained that before the new law, “foreign entities could sell their Nigerian assets by structuring the transaction as an offshore share transfer, thereby avoiding Nigerian Capital Gains Tax.”
He made this remark at the Rand Merchant Bank Asset Management event held in Lagos on Wednesday, October 29, themed “Navigating Opportunity: How Nigeria’s New Tax Bill Reshapes Investment Strategy.”
“Specifically,” Wright said, “Nigerian assets are owned by a local company, which in turn is owned by an offshore holding company. When the owners of this offshore company sell its shares to a new buyer, the change of ownership happens outside Nigeria’s jurisdiction. Although the valuable Nigerian asset has effectively changed hands, because the sale occurred offshore, no capital gains tax is paid in Nigeria.”
The new NTA effectively ends this arrangement. It provides that shares or interests in a foreign entity will now be deemed to be situated in Nigeria for tax purposes if more than 50% of their value is derived from Nigerian assets.
Wright described the amendment as a patriotic step, noting that the disposal of an offshore company that owns Nigerian assets “may now trigger CGT in Nigeria.”
Mandate for corporate restructuring
With the new rules in force, companies with offshore structures tied to Nigerian operations must urgently review their arrangements to assess exposure and compliance risk.
According to Wright, many existing offshore setups may no longer be defensible under the new framework. “Companies must scrutinise their current offshore structures to determine whether they possess substantial economic presence or are merely artificial vehicles to hold assets in Nigeria,” he said.
He advised investors to consider setting up Special Purpose Vehicles (SPVs) dedicated solely to holding Nigerian assets, rather than embedding them within larger offshore holding structures. This, he said, could simplify compliance and minimise CGT exposure.
Optimising HoldCo structures
Lolade Ososami, Partner at Udo Udoma & Belo-Osagie, noted that optimal structuring depends on the type and purpose of the underlying Nigerian assets.
“If the assets are both income-generating and intended for eventual sale, a single Holding Company (HoldCo) structure is often more efficient,” she said.
However, she added that if the goal is to ring-fence assets, separating financial and legal risks, then creating a dedicated subsidiary for each asset remains the better option. “This simplifies legal and tax reporting and allows for a more efficient and targeted disposal when an investor decides to exit a single asset,” Ososami said.
The double-edged sword of tax residency
Beyond indirect share transfers, the new tax rules heighten the risk around cross-border tax residency. Ososami cautioned that even if a HoldCo is registered in a low-tax jurisdiction such as Mauritius, it may still be deemed tax resident in Nigeria if key management decisions and board meetings are held in Nigeria.
This classification is crucial: once an entity is considered a Nigerian tax resident, its worldwide income becomes taxable in Nigeria. That opens the door to potential double taxation, especially where there is no comprehensive Double Tax Treaty (DTT) between Nigeria and the foreign jurisdiction.
While the new law introduces a unilateral relief mechanism to mitigate this, Ososami pointed out its limitations. “Other existing treaties have well-defined rules that address different types of income and vehicles,” she explained. “You don’t have that under the unilateral rules—just a general provision in the domestic law.”
This ambiguity, she added, puts greater pressure on investors to clearly define and document where their tax residence lies.
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