Global advisory firm KPMG has identified multiple errors, gaps, omissions and inconsistencies in Nigeria’s newly enacted Tax Act (NTA), urging the federal government to urgently review the legislation to ensure it achieves its intended reform goals.
In its latest newsletter titled Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions, the firm acknowledged that the new tax laws have strong potential to significantly improve tax administration and revenue generation if properly implemented.
However, KPMG warned that shortcomings in clarity and structural oversights could undermine those objectives if left unaddressed.
“There are many provisions in these laws that could increase government revenue if effectively implemented,” the firm noted. “Nonetheless, a careful balance must be maintained between revenue mobilisation and sustainable economic growth.”
KPMG stressed that the government must urgently review the highlighted gaps, inconsistencies and lacunae to ensure the reforms deliver fairness, efficiency and competitiveness.
According to the firm, the new tax framework was designed to promote equity, simplify tax administration, enhance competitiveness, adapt to evolving economic realities, curb tax evasion and avoidance, boost revenue and stimulate growth. Yet, several technical and policy flaws threaten these goals.
One major concern raised relates to Section 17(3)(b) of the NTA, which addresses the taxation of non-resident persons. KPMG recommended that Section 6(1) of the Nigeria Tax Administration Act (NTAA) be amended to clearly exempt non-residents without a Permanent Establishment (PE) or Significant Economic Presence (SEP) from tax registration where withholding tax represents the final tax.
Although Section 17(4) of the NTA provides that deductions at source are final where a non-resident lacks PE or SEP in Nigeria, the firm noted that the law does not explicitly relieve such persons of registration and filing obligations, a situation it described as inconsistent with legislative intent.
On the issue of tax imposition under Sections 3(b) and 3(c) of the NTA, KPMG highlighted ambiguity surrounding the taxation of communities. While “community” appears in the definition of a “person” under Section 201, it is omitted from the list of taxable entities.
The firm advised that the law should either clearly state that communities are taxable or expressly exempt them to eliminate uncertainty.
KPMG also raised concerns about Section 6(2) of the NTA dealing with Controlled Foreign Companies (CFCs). It noted inconsistencies in how undistributed foreign profits are treated, pointing out that while such profits are deemed distributed and taxed at company income tax rates, dividends from Nigerian companies enjoy franked investment income status.
This, the firm said, creates unequal tax treatment between local and foreign dividends, which may discourage cross-border investment.
Further criticism was directed at Section 20(4) of the NTA, which restricts tax deductions for foreign currency expenses to the naira equivalent at the official exchange rate set by the Central Bank of Nigeria.
KPMG argued that this provision unfairly penalises businesses that source foreign exchange at higher market rates due to limited official supply, warning that it fails to account for prevailing liquidity challenges in the forex market.
While acknowledging the government’s intention to discourage speculative forex trading and support naira stability, the firm recommended a focus on improving liquidity and strengthening reporting requirements instead.
The firm also faulted Section 21 of the NTA, which disallows tax deductions for expenses on which Value Added Tax (VAT) was not charged.
According to KPMG, this effectively punishes companies for the non-compliance of suppliers, even where expenses were legitimately incurred for business purposes. It warned that such provisions could expose compliant businesses to unfair tax liabilities.
“The only condition for deductibility should be that the expense is wholly and exclusively incurred for business purposes,” the firm said.
On the treatment of capital losses under Section 27 of the NTA, KPMG noted that the law is unclear on whether such losses, aside from those related to digital or virtual assets, are deductible. The firm argued that the intention appears to support deductibility and urged clarification.
In reviewing Section 30 of the Act, which governs the taxation of individuals, KPMG observed that allowable deductions are now limited to specific items such as pension contributions, health insurance, mortgage interest on owner-occupied homes, life insurance premiums, annuities and rent relief capped at N500,000.
While acknowledging that expanded tax bands aim to protect low-income earners, the firm cautioned that excessive taxation of high-income individuals could stifle investment, encourage capital flight and undermine economic growth.
KPMG noted that the current rent relief threshold is insignificant compared to personal allowances offered in other jurisdictions. It recommended retaining the consolidated personal allowance previously provided under the Personal Income Tax Act to encourage voluntary compliance.
The firm further advised the government to strengthen international cooperation on tax administration, improve information sharing, and build institutional capacity.
Businesses were urged to conduct detailed assessments of how the new laws affect their operations, update internal systems, strengthen documentation, train finance teams, and seek professional support to ensure compliance and manage tax risks.
KPMG concluded that while Nigeria’s new tax laws represent an important reform milestone, their success will ultimately depend on prompt legislative refinement, effective implementation and sustained engagement with stakeholders.
