Global audit and tax advisory firm, KPMG, has raised serious concerns over Nigeria’s newly enacted tax laws, identifying what it described as errors, inconsistencies, gaps and omissions that could undermine the objectives of the sweeping fiscal reforms.
The concerns were outlined in a detailed newsletter titled “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions,” released after President Bola Ahmed Tinubu assented to the tax reform bills on June 26, 2025.
The reforms, which were initiated by the Presidential Fiscal Policy and Tax Reforms Committee, were designed to improve oversight of government revenues, streamline tax administration, align Nigeria’s tax system with global best practices and enhance efficiency in revenue collection.
The laws include the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), which took effect on January 1, 2026, as well as the Nigeria Revenue Service Establishment Act (NRSEA) and the Joint Revenue Board Establishment Act (JRBEA), which were assented to in June 2025 but also became operational on January 1, 2026.
While acknowledging the transformative potential of the reforms, KPMG stressed that urgent amendments are required to avoid unintended consequences.
According to the firm, “if well implemented, there are many provisions in the laws that would result in increased revenue for the government,” but warned that revenue generation must be balanced with sustainable economic growth.
One of the issues highlighted by KPMG relates to Section 3(b) and (c) of the NTA, which deals with the imposition of tax. The firm noted that while the section specifies individuals, families, companies, enterprises, trustees and estates as taxable persons, it omits “community,” despite the fact that “community” is included in the definition of “person” under Section 201 of the Act.
“Recommendation – If the intention is to impose tax on communities, this should be explicitly introduced in Section 3. Otherwise, the law should clearly state that communities are now exempt from tax,” KPMG advised.
KPMG also identified gaps in Section 6(2) of the NTA, which deals with Controlled Foreign Companies (CFCs). The firm observed that while undistributed foreign profits are deemed to be distributed and included in the profits of a Nigerian company—implying taxation at 30 percent—dividends from foreign companies do not appear to enjoy the same treatment as those from Nigerian companies.
It warned that this creates unequal tax treatment, noting that “it thus appears that such dividends will be taxed at the income tax rate,” unlike dividends from Nigerian companies which are treated as franked investment income.
“Recommendation – Modify the section by providing clarity on the treatment of foreign and local dividends,” the firm stated.
Another concern was raised over Section 17(3)(b) of the NTA, which addresses the taxation of non-resident persons. KPMG argued that while the law recognises that withholding tax can serve as final tax for non-residents without Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria, it does not clearly exempt such persons from tax registration under Section 6(1) of the NTAA.
“This, in our view, cannot be the intention of the law,” KPMG said. “The intention should be that non-residents that do not have PE or SEP in the country should not be required to file tax returns as provided for in Section 11(3) of the NTAA.”
The firm also expressed concern over provisions governing foreign exchange transactions, which require expenses incurred in foreign currency to be deducted only at the official exchange rate published by the Central Bank of Nigeria (CBN).
According to KPMG, this means that companies purchasing foreign exchange at rates higher than the official rate cannot claim tax deductions for the difference.
While noting that the intention may be to discourage speculative forex trading and support naira stability, KPMG argued that current liquidity challenges were not fully considered.
“We do not think that this condition is necessary at this time. With the current state of the economy, focus should be on improving liquidity and introducing stricter reporting requirements to track and monitor foreign exchange transactions,” the firm stated.
KPMG further faulted Section 21 of the NTA, which disallows expenses on which Value Added Tax (VAT) was not charged, even if the expenses were legitimately incurred for business purposes.
“This means that such expenses will not be considered allowable tax deductions even when those expenses have been validly incurred,” KPMG said, warning that “a company could be held accountable for any inaction or non-performance by its suppliers or service providers.”
The firm added that while defaulting suppliers may eventually be required to pay the VAT during audits, “the company will have already been denied the ability to claim a deduction for the related expense.”
Overall, KPMG reaffirmed that Nigeria’s new tax laws have the capacity to modernise tax administration and boost revenue, but cautioned that without prompt clarification and amendments, the reforms could create compliance challenges, discourage investment and weaken confidence in the tax system.
