KPMG, globally renowned auditing firm with expertise on tax services, says it has identified loopholes in the new tax laws.
The Presidential Fiscal Policy and Tax Reforms Committee had said it proposed the laws to provide better oversight on government revenues, and streamline tax administration in Nigeria to bring it closer to best practices globally and improve efficiencies in tax administration.
However, since President Bola Tinubu assented to the laws on June 26, 2025, there have been different forms of controversies surrounding them, reports Daily Trust.
The laws – the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA) – became effective on January 1, 2026.
Other are – the Nigeria Revenue Service Establishment Act (NRSEA) and the Joint Revenue Board Establishment Act (JRBEA) – which had become effective since June 26, 2025, were activated on January 1, 2026.
In a newsletter titled, “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions”, KPMG called for urgent reviews to ensure the attainment of the tax reform objectives.
The piece said if well implemented, there are many provisions in the laws that would result in increased revenue for the government.
But it laid emphasis on the need to strike a balance between revenue generation and sustainable growth.
“Section 3(b)&(c) of the NTA – Imposition of tax – Error/Gap – The section specifies persons on
whom taxes should be levied, including individuals, families, companies or enterprises, trustees,
and an estate, but omits ‘community.’ However, community’ is included in the definition of ‘person’.”
Under Section 201
“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.
Section 6(2) of the NTA – Controlled foreign companies (CFC) Error/Gap – The Act states that undistributed foreign profits are to be ‘construed as distributed’ but also mandates that they be “included in the profits of the Nigerian company” (implying income tax at 30%).
Though dividend distributed by a Nigerian company is deemed to be franked
investment income, this does not appear to be the case with dividends distributed by foreign
It thus appears that such dividends will be taxed at the income tax rate. Consequently, there will be differences in the treatment of dividends distributed by Nigerian companies and those distributed by foreign companies.
KPMG in its latest newsletter titled, “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions”, reaffirmed the potential of the laws to transform tax administration in the country.
Recommendation – Modify the section by providing clarity on the treatment of foreign and
local dividends.”
Citing an error/gap in Section 17(3) (b) of the NTA which bothered on taxation of non-resident persons, KPMG recommended that Section 6(1) of the NTAA should be updated to include not only non-residents that derive passive income from investments in Nigeria but also income in which the deduction at source is the final tax.
This, it stated, would clearly absolve non-residents from the tax registration requirement where they have no Permanent Establishment (PE) or Significant Economic Presence (SEP) in the country.
The report stated, “This section specifies the conditions under which profits derived by a non-resident are taxable in Nigeria. Although Section 17(4) of the NTA states that payment deducted at source in respect of payments by Nigerian residents to non-residents, irrespective of where the service is rendered, shall be final tax where the non-resident has no permanent establishment (PE) or Significant Economic Presence (SEP) in Nigeria to which the payment is attributable, it does not clearly absolve the non-resident from tax registration requirements under Section 6(1) of the NTAA.
This in, our view, cannot be the intention of the law. 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 section states that expenses incurred in a currency other than the naira may only be deducted to the extent of its naira equivalent at the official exchange rate published by the Central Bank of Nigeria (CBN).
According to KPMG, this implied that where a business buys forex at a rate that is higher than the official rate, such a company cannot claim tax deduction for the difference in value between the official and the other rates.
The intention, it noted, is to discourage speculative foreign exchange transactions and encourage the appreciation of the naira, adding however, that issues surrounding the accessibility of all forex needs due to supply problems have not been 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.”
KPMG also picked holes in Section 21 of the NTA which includes expenses on which VAT had not been charged.
“This means that such expenses will not be considered allowable tax deductions even when those expenses have been validly incurred for business purposes. This implies that a company could be held accountable for any inaction or non-performance by its suppliers or service providers.”
“While the defaulting service providers may eventually be required to pay the VAT during an audit or investigation, the company will have already been denied the ability to claim a deduction for the related expense,” it said.
