Global auditing firm KPMG has identified loopholes and inconsistencies in Nigeria’s newly enacted tax laws, warning that urgent reviews are needed to ensure the reforms achieve their intended objectives.
The laws—Nigeria Tax Act (NTA), Nigeria Tax Administration Act (NTAA), Nigeria Revenue Service Establishment Act (NRSEA), and Joint Revenue Board Establishment Act (JRBEA)—were assented to by President Bola Tinubu on June 26, 2025, and became effective on January 1, 2026.
They were designed by the Presidential Fiscal Policy and Tax Reforms Committee to streamline tax administration, improve oversight, and align Nigeria’s system with global best practices.
In a newsletter titled “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions”, KPMG acknowledged the potential of the laws to boost government revenue but stressed the need to balance revenue generation with sustainable economic growth.
Key Issues Highlighted:
- Section 3(b)&(c) of the NTA – Imposition of Tax
- Error/Gap: The section specifies individuals, families, companies, trustees, and estates as taxable persons but omits “community,” even though “community” is included in the definition of “person.”
- Recommendation: Explicitly include communities if they are intended to be taxed, or exempt them clearly.
- Section 6(2) of the NTA – Controlled Foreign Companies (CFCs)
- Error/Gap: Undistributed foreign profits are deemed “distributed” and taxed at 30%, but dividends from foreign companies are not treated as franked investment income like those from Nigerian firms.
- Recommendation: Clarify treatment of foreign versus local dividends to avoid double taxation and inconsistencies.
- Section 17(3)(b) of the NTA – Non-Resident Taxation
- Error/Gap: Non-residents may still be required to register for tax despite Section 17(4) stating that deductions at source should be final tax where no Permanent Establishment (PE) or Significant Economic Presence (SEP) exists.
- Recommendation: Amend NTAA Section 6(1) to absolve non-residents without PE or SEP from filing tax returns.
- Foreign Exchange Deductions
- Error/Gap: Expenses incurred in foreign currency can only be deducted at the official CBN rate, disallowing deductions for higher parallel market rates.
- Recommendation: Focus on improving forex liquidity and stricter reporting rather than restricting deductions, given Nigeria’s supply challenges.
- Section 21 of the NTA – VAT-Linked Expenses
- Error/Gap: Expenses not charged VAT are disallowed as deductions, even if validly incurred for business purposes.
- Implication: Companies could be penalized for suppliers’ failures, losing deductions until VAT is later recovered during audits.
KPMG reaffirmed that the reforms have strong potential to transform Nigeria’s tax administration but warned that ambiguities could discourage compliance, create inequities, and undermine investor confidence.
The firm emphasized that while government revenue is critical, reforms must also support business sustainability, clarity for taxpayers, and fairness in enforcement.
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