By Charles Maduka
KPMG, a global network of professional services firms, has identified several errors, inconsistencies, gaps and omissions in Nigeria’s newly enacted tax laws, warning that the issues could undermine the objectives of the reforms if not urgently reviewed.
The firm disclosed this in a newsletter released after a detailed review of the New Tax Act, 2025, and related tax legislation. According to KPMG, some provisions of the law require immediate amendments to improve clarity, fairness and effectiveness in tax administration.
KPMG noted that Section 3(b) and (c) of the New Tax Act lists persons on whom taxes may be imposed but fails to mention “communities”, even though communities are included in the definition of a “person” under the law. The firm said this omission could create uncertainty and recommended that communities should either be clearly included or expressly exempted from taxation.
The firm also raised concerns over Section 6(2) of the Act, which deals with controlled foreign companies. KPMG warned that the provision could result in double taxation, as it requires undistributed foreign profits to be treated as if they were distributed, while also mandating that such profits be included in the taxable profits of Nigerian companies. It explained that this could expose companies to income tax at 30 percent and called for clearer rules on how foreign and local dividends should be treated.
On tax administration, KPMG said Section 6(1) of the Nigeria Tax Administration Act, 2025, should be amended to exempt non-resident companies whose income is already subject to final withholding tax from registering for tax. The firm said this change would align with Section 11(3) of the same Act, which already exempts such companies from filing tax returns.
Addressing withholding tax provisions, KPMG recommended that Section 17(3)(c) of the New Tax Act be amended to exempt insurance premiums paid to non-resident companies. It argued that the current requirement for Nigerian residents to deduct withholding tax on such payments discourages investment, economic growth and competitiveness.
The firm also advised that Section 20(4) of the Act, which restricts the deduction of foreign exchange expenses to Central Bank of Nigeria rates, should be removed. Instead, KPMG suggested that the focus should be on improving foreign exchange liquidity and strengthening reporting and compliance requirements.
KPMG further recommended the removal of Section 21(p) of the Act, stating that business expenses should be tax-deductible as long as they are incurred wholly and exclusively for business purposes, regardless of whether value-added tax has been paid on them.
On capital losses, the firm said Section 27 of the Act lacks clarity and should be amended to clearly explain how such losses should be deducted for tax purposes.
In the area of personal income tax, KPMG urged the government to retain the former consolidated personal allowance provided under the Personal Income Tax Act, with adjustments for inflation. It described the current N500,000 rent relief as insignificant, noting that it does not adequately balance the tax burden on individuals or encourage voluntary tax compliance.
The firm also identified gaps and ambiguities in several other provisions of the New Tax Act, including Sections 39, 40, 47, 63(4), 72, 162, 196 and 201, as well as parts of the First and Second Schedules. According to KPMG, these sections should be reviewed to enhance clarity and effectiveness.
It said the proposed amendments would help address challenges relating to the computation of chargeable gains, indirect transfers, tax exemptions and incentives for specific sectors of the economy.
KPMG further recommended a review of Paragraphs 5 and 9 of the Second Schedule, the Ninth Schedule on stamp duties, the Twelfth Schedule on partnerships and pensions, Sections 13, 22(2) and 22(9) of the Nigeria Tax Administration Act, and Section 5 of the Joint Revenue Board Establishment Act.
The firm also called for the introduction of a simplified certification process through the Tax-Pro Max platform to enable small companies to easily confirm their status to business partners. It said this would resolve the difficulties larger companies face when trying to verify the “small company” status of their counterparts.
KPMG urged the government to urgently address all inconsistencies in the new tax laws in order to strike a balance between revenue generation and sustainable economic growth. It also advised businesses to assess how the new laws affect their operations and ensure full compliance with adequate documentation and reporting systems in place.
Leave a Reply