KPMG Identifies Errors, Gaps, and Inconsistencies in Nigeria's New Tax Laws

Introduction

KPMG, one of the Big Four accounting firms, has released a comprehensive review of Nigeria's newly enacted tax legislation under the Nigeria Tax Act 2025. Their professional analysis identifies significant gaps, errors, and inconsistencies that could undermine the reform's intended objectives of equity, simplification, and revenue generation.

This is not political commentary—it's professional technical analysis from one of the world's most respected tax advisory firms.

The 22 Key Issues Identified by KPMG

General Issues

1. The new tax laws contain errors - Technical mistakes exist in the legislation text

2. The laws contain inconsistencies - Conflicting provisions across different sections

3. There are gaps and omissions - Important areas left unaddressed

4. Some provisions lack clarity - Ambiguous language creates uncertainty

Non-Resident Taxation Issues

5. Rules on taxation of non-resident persons are unclear - Creates confusion for international businesses

6. Tax registration requirements unclear - The law does not clearly exempt non-residents without Permanent Establishment (PE) or Significant Economic Presence (SEP) from tax registration, even when they're only subject to withholding tax

KPMG recommends updating Section 6(1) of the NTAA to explicitly exempt non-residents without PE or SEP from filing obligations.

Corporate Tax Issues

7. Community taxation is unclear - The law omits "community" from taxable persons while including it in the definition of "person," creating legal uncertainty

8. Controlled Foreign Companies (CFC) rules lack clarity - Potential for double taxation where "undistributed foreign profits are construed as distributed" while also being "included in the profits of the Nigerian company"

9. Treatment of undistributed foreign profits is unclear - Ambiguity about when and how these profits are taxed

10. Dividends from foreign companies may be taxed differently - Different treatment from Nigerian company dividends creates complexity

Withholding Tax Issues

11. Insurance premiums to non-residents - These should not be subject to withholding tax but the law is unclear

Deduction Issues

12. Rules on allowable tax deductions are restrictive - May discourage legitimate business expenses

13. Forex expenses limited to CBN rate - Section 20(4) limits deductions for foreign currency expenses to official CBN rates, even when businesses legitimately pay higher market rates. KPMG argues this discourages necessary business transactions.

14. VAT-related deductions - Business expenses without VAT charged are disallowed as tax deductions, even when validly incurred. KPMG describes this as problematic since "a company could be held accountable for any inaction by its suppliers"

15. Capital losses unclear - Except for digital/virtual assets, it's not clearly stated whether capital losses are deductible

Personal Income Tax Issues

16. Deductible items for individuals are limited - Fewer allowable deductions than before

17. Rent relief cap too small - The ₦500,000 rent relief cap is significantly less than previous personal allowances

18. High-income earners face oppressive taxation - Combined with other restrictions, top earners may face excessive tax burden

Economic Impact Concerns

19. Over-taxation may lead to non-compliance - KPMG warns that excessive taxation risks "noncompliance and capital flight"

20. May discourage investment and entrepreneurship - Restrictive provisions could deter business formation

21. Job creation may be affected - Economic activity could be suppressed

Implementation Concerns

22. Tax authorities need international cooperation and capacity building - FIRS and state revenue services need enhanced capabilities to implement complex new provisions

KPMG's Recommendations

For Government

KPMG urges the government to conduct comprehensive reviews of the legislation to address identified issues before they create compliance problems.

For Businesses

KPMG recommends that businesses:

• Conduct detailed **tax footprint evaluations** to understand impact
• Improve **documentation and record-keeping** systems
• **Reconfigure systems** to comply with new requirements
• **Review tax exposure** under the new provisions

What This Means for You

If You're a Business Owner

Review how these issues might affect your business. Key concerns:

• **Forex transactions**: If you buy foreign currency above CBN rates, you may not be able to deduct the full cost
• **Supplier VAT compliance**: If your suppliers don't charge VAT properly, you could lose deductions
• **International operations**: CFC and non-resident rules need careful analysis

If You're an Employee

The personal tax changes are relatively clearer, but:

• **Rent relief**: The ₦500,000 cap may be insufficient if you're a higher earner
• **Limited deductions**: Fewer items can reduce your taxable income

If You're a Tax Professional

This KPMG analysis provides important guidance for advising clients. Areas requiring caution include non-resident taxation, CFC provisions, and deduction rules.

The Bigger Picture

This professional review highlights an important reality: even major legislation can have technical flaws. KPMG's analysis is not criticism—it's the kind of professional scrutiny that helps improve tax administration.

The government may issue clarifications, practice notes, or amendments to address these concerns. We'll update our calculators and guides as official guidance emerges.

Sources

Read the full KPMG report: Inherent Errors, Gaps and Omissions in New Tax Acts (PDF)

Media coverage: ThisDay | Nairametrics

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*For specific tax advice, consult a qualified professional.*