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Granting equity in 

the 

Nigeria

 

Get to know everything about your taxation and reporting obligations in 

the 

Nigeria

Introduction

⚠️  The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️

A more comprehensive set of information for this country and work relationship is available on Easop.

If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡

There are foreign exchange regulations which make it practically impossible to remit funds required for paying the exercise price from Nigeria to the US. As a result, it’s recommended to allow the grantees to have the possibility to exercise their stock options by way of “cashless exercise” or “net exercise” arrangement (or to offer other types of incentives that don’t require payment of an exercise price, such as Stock Appreciation Rights (SARs)).

Regular employee

✅ Yes, you can grant non-qualified stock-options (NSO) to employees in Nigeria.

In a nutshell, what does taxation look like?

  • At grant 👉 No taxation at grant.

  • At exercise 👉 The spread (i.e. the difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as any employment income.
  • At sale 👉 Any increase in value of the shares between the time of exercise of the stock options and the time of sale of the shares will be taxed as capital gain.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Employee via EoR

✅ Yes, you can grant non-qualified stock-options (NSO) to EoR employees in Nigeria.

In a nutshell, what does taxation look like?

  • At grant 👉 No taxation at grant.

  • At exercise 👉 The spread (i.e. the difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as any employment income.
  • At sale 👉 Any increase in value of the shares between the time of exercise of the stock options and the time of sale of the shares will be taxed as capital gain.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Contractor

✅ Yes, you can grant non-qualified stock-options (NSO) to contractors in Nigeria.

Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that can go with it). This will never be the only factor though, what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).

In a nutshell, what does taxation look like?

  • At grant 👉 No taxation at grant.

  • At exercise 👉 The spread (i.e. the difference between the fair market value (FMV) of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as any employment income.
  • At sale 👉 Any increase in value of the shares between the time of exercise of the stock options and the time of sale of the shares will be taxed as capital gain.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

Want to know more about equity in 

the 

Nigeria

?

Discover everything you need to know about taxation and reporting obligations for you and your team in 

the 

Nigeria

Get in touch