PwC Nigeria said the country’s new 30 per cent capital gains tax (CGT) regime has expanded the country’s taxing reach to certain offshore transactions involving Nigerian companies and assets, while leaving key questions over how the new indirect-transfer rules will be applied.
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The observation follows the commencement of the Nigeria Tax Act (NTA) on January 1, which increased the CGT rate for companies from 10 per cent to 30 per cent and expressly brought indirect transfers of shares or interests in Nigerian companies and assets within the scope.
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PwC, in its analysis of Nigeria’s new CGT regime, said a transaction involving the sale of a foreign company in the United Kingdom, United Arab Emirates, Netherlands, South Africa or another jurisdiction could now create tax consequences in Nigeria, even where there is no direct transfer of Nigerian shares.
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According to the firm, the reforms are intended to ensure that gains derived from Nigerian assets remain within Nigeria’s taxing jurisdiction, including where offshore holding structures are used.
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Under Section 17(2) of the NTA, gains derived by a non-resident from the disposal of chargeable assets are taxable in Nigeria where the asset is located in Nigeria or is deemed to be located in Nigeria.
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Section 46(f), PwC said, further provided that shares or comparable interests in foreign entities are deemed to be located in Nigeria where, at any time during the 365 days preceding their disposal, more than 50 per cent of their value is derived directly or indirectly from Nigerian assets.
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Section 47 also provides that gains from the disposal of shares by a non-resident constitute chargeable gains where the disposal results in a change in the ownership structure or group membership of a Nigerian company or a change in ownership or interest in an asset located in Nigeria.
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It identified two possible interpretations. Under the first, the 50 per cent Nigerian-asset threshold serves as a gateway to taxation. This would mean foreign shares would only be treated as Nigerian assets, and become subject to Nigerian CGT, where more than half of their value is derived from Nigerian assets.
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Under the second interpretation, the change-of-ownership provision operates independently of the threshold. On that reading, a non-resident disposal that indirectly changes the ownership of a Nigerian company or asset could attract CGT even where the foreign entity does not meet the 50 per cent Nigerian-value test.
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PwC said taxpayers would generally favour the first interpretation because it would narrow the scope of the tax, although it noted that there was a strong argument that the change-of-ownership provision was designed as a standalone charge.

The expanded reach of the tax comes alongside a sharp increase in Nigeria’s headline CGT rate.
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PwC’s comparison of selected African jurisdictions showed Nigeria’s 30 per cent rate above Ghana’s 25 per cent, South Africa’s 21.6 per cent, Morocco’s 20 per cent and Kenya’s 15 per cent.
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The firm said Nigeria therefore combines the highest headline CGT rate among the selected major African economies with one of the broadest indirect-transfer regimes in the comparison, noting that many other jurisdictions restrict indirect-transfer rules to interests deriving their value primarily from mineral assets or immovable property.
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Beyond the scope of indirect transfers, PwC identified several unresolved technical and administrative issues under the new regime.