Navigating Tax Considerations in Mergers and Acquisitions: A Comprehensive Overview.

As businesses continually evolve to align with dynamic economic policies, corporate restructuring becomes a strategic imperative for entities seeking resilience, growth, or compliance with regulatory changes. Corporate restructuring may arise from various circumstances such as business failure, expansion goals, or regulatory mandates like increased minimum capital requirements for financial institutions. One of the most prevalent forms of corporate restructuring, particularly in Nigeria, is through Mergers and Acquisitions (M&A). Distinguishing Mergers and Acquisitions: It’s essential to clarify that Mergers and Acquisitions are terms often used interchangeably, but they hold distinct meanings. A merger involves the combination of two or more companies to create an entirely new entity (A + B = C), while an acquisition entails one company purchasing another (A + B = A). Tax Implications in Mergers and Acquisitions: In the realm of corporate restructuring, particularly M&A, understanding the tax implications is crucial. This article sheds light on these tax considerations, taking into account the amendments introduced by the Finance Act. 1. Notification to Federal Inland Revenue Service (FIRS): 2. Capital Gains Tax (CGT): 3. Transaction Taxes (VAT, WHT, and Stamp Duties): 4. Companies Income Tax: Conclusion: The Finance Act 2019 has played a pivotal role in clarifying contentious issues surrounding the tax implications of Mergers and Acquisitions. A thorough tax due diligence, encompassing both companies involved, becomes essential before concluding any M&A transaction. FIRS seeks assurance that the new entity will shoulder the tax liabilities of the merging entities. Professional advice is paramount during M&A processes to navigate potential tax exposures effectively. In essence, understanding the nuanced tax landscape surrounding M&A transactions is imperative for businesses embarking on corporate restructuring journeys in Nigeria. 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.