CIT and Mergers & Acquisitions: Tax Implications for Business Restructuring in Nigeria.


Mergers and acquisitions (M&A) are strategic business transactions that can result in significant changes to a company’s structure and financial landscape. In Nigeria, as in many countries, these transactions come with various tax implications that businesses need to navigate carefully. The Companies Income Tax (CIT) Act, along with other relevant tax laws, governs the tax considerations surrounding M&A activities. In this article, we will explore the key tax implications for businesses engaging in mergers and acquisitions in Nigeria.

Types of M&A Transactions:

M&A transactions in Nigeria can take several forms, each with its own set of tax considerations:

  1. Merger: A merger involves the combination of two or more companies to form a new entity. This new entity assumes the assets, liabilities, and operations of the merging companies.
  2. Acquisition: In an acquisition, one company (the acquirer) purchases the assets or shares of another company (the target). The target company may continue to exist or be merged into the acquirer.
  3. Demerger: A demerger is the opposite of a merger. It involves the division of a single company into two or more entities, each taking ownership of specific assets and liabilities.

Tax Implications of M&A Transactions:

  1. Capital Gains Tax: Depending on the type of transaction and the assets involved, capital gains tax may be applicable. Capital gains tax is levied on any gains realized from the sale of assets such as shares or real estate.
  2. Stamp Duty: Stamp duty is payable on various documents associated with M&A transactions including share purchase agreements, asset transfer agreements, and merger documents.
  3. Value Added Tax (VAT): VAT may be applicable to certain M&A transactions particularly when goods or services are transferred as part of the deal.
  4. Loss Utilization: In some cases, losses incurred by the target company in an acquisition can be utilized to offset profits in the acquirer’s company for tax purposes.
  5. Capital Allowances: Companies involved in mergers or acquisitions may be eligible for capital allowances on qualifying assets, which can result in tax deductions.
  6. Withholding Tax: Withholding tax may be required on dividends or interest paid to shareholders or bondholders in an M&A transaction.
  7. Transfer Pricing: Transfer pricing regulations apply to transactions between related parties in M&A deals to ensure that prices are set at arm’s length.

Tax Planning and Compliance:

Proper tax planning and compliance are essential when engaging in M&A transactions in Nigeria:

  1. Due Diligence: Thorough due diligence should be conducted to assess the tax position of the target company and identify potential tax liabilities.
  2. Structuring: The choice of M&A structure can have significant tax implications. Careful structuring can help optimize the tax outcome.
  3. Documentation: Accurate documentation is crucial to ensure compliance with tax laws and regulations. This includes proper record-keeping and filing of required tax returns.
  4. Professional Advice: Engaging tax experts and legal counsel with experience in M&A transactions is highly advisable to navigate the complex tax landscape effectively.


Mergers and acquisitions are complex transactions that can offer significant benefits to businesses in Nigeria. However, the tax implications should not be underestimated. Proper tax planning, due diligence, and compliance are essential to ensuring that M&A transactions are both legally sound and tax-efficient. As the CIT Act and tax regulations evolve, it is crucial for businesses to stay informed and seek professional guidance to navigate the ever-changing tax landscape surrounding M&A activities.

For professional advice on Accountancy, Transfer Pricing, Tax, Assurance, Outsourcing, online accounting support, Company Registration, and CAC matters, please contact Sunmola David & CO (Chartered Accountants & Tax Practitioners) at Lagos, Ogun state Nigeria offices, You can also reach us via WhatsApp at +2348038460036.