A major professional services firm has raised the alarm over significant errors contained in Nigeria's newly enacted tax legislation, warning that they could sow widespread confusion among businesses and taxpayers. KPMG Nigeria, in a detailed review, flagged four critical gaps and inconsistencies in the laws that took effect from 1 January 2026.
Key Flaws Identified in the New Tax Regime
KPMG's analysis covered the Nigeria Tax Act (NTA), the Nigeria Tax Administration Act, the Nigeria Revenue Service Establishment Act, and the Joint Revenue Board Establishment Act. The firm stated that the laws contain errors, omissions, and inconsistencies that require urgent reconsideration to meet their stated objectives of fairness and efficiency.
One of the primary issues revolves around the taxation of communities. Section 3(b) and (c) of the Nigeria Tax Act omits the word "community" when defining taxable persons. This omission creates legal uncertainty, leaving it unclear whether communities are liable to pay tax under the new system. KPMG warned that this could lead to inconsistent enforcement and disputes across different jurisdictions in Nigeria.
Risks for Investors and Foreign Companies
The report also highlighted a potential inconsistency in the taxation of dividends. Section 6(2) of the NTA could result in foreign dividends being taxed at the income tax rate, unlike dividends from Nigerian companies. This unequal treatment, KPMG argues, would complicate tax planning for international investors and multinational corporations operating in the country.
Furthermore, the firm pointed to compliance risks for non-resident companies. Sections 17(3)(b) and (c) of the NTA do not clearly exempt non-resident companies without a permanent establishment or Significant Economic Presence in Nigeria from filing tax returns. This lack of clarity subjects them to potential unnecessary compliance burdens and regulatory uncertainty.
Problematic Restrictions on Business Expenses
KPMG also criticized provisions in Sections 20 and 21 of the NTA. These sections limit deductions for foreign currency expenses to the official Central Bank of Nigeria exchange rate and disallow expenses on which Value Added Tax (VAT) has not been charged.
The firm cautioned that, given current economic realities, such rigid restrictions could strain businesses. Instead of outright disallowances, KPMG recommended that policymakers focus on improving liquidity and enforcing stricter reporting and monitoring of foreign exchange transactions.
Call for Urgent Legislative Action
KPMG emphasized that these identified gaps could negatively impact tax compliance, financial reporting, and investment decisions for both local firms and multinationals. The professional services company has called for urgent clarifications and amendments to align the laws with goals of competitiveness and sustainable revenue generation.
While the certified versions of the Acts released by the National Assembly may resolve some concerns, KPMG noted that the true test will be in the practical interpretation and application of these laws. The firm's review underscores the challenges in implementing the tax reforms championed by President Bola Tinubu's administration.
In related news, tax experts have moved to clarify a common misconception. The Chairman of the Chartered Institute of Taxation of Nigeria (CITN), Abuja District, Mr. Ben Enamudu, recently stated that the new laws do not impose a tax on bank balances. He clarified that the widely discussed ₦50 charge is a stamp duty applied only to specific electronic transfers, not a levy on deposited funds.
