KPMG flags multiple errors, gaps in new tax laws, seeks ‘urgent’ review
KPMG, a global professional services firm, has raised concerns over what it describes as multiple errors and gaps in Nigeria’s newly enacted tax laws, warning that the issues could undermine the legislation’s intended objectives if not urgently addressed.
In a newsletter reviewing the New Tax Act (NTA) 2025 and the Nigeria Tax Administration Act (NTAA) 2025, the firm identified inconsistencies, omissions, and unclear provisions across several sections of the laws.
KPMG noted that Sections 3(b) and (c) of the NTA identify persons liable to taxation but fail to expressly include the term “community,” even though it appears in the Act’s definition of a person. The firm advised lawmakers to clearly state whether communities are taxable or exempt to eliminate uncertainty.
On controlled foreign companies, KPMG warned that Section 6(2) of the NTA could result in double taxation. According to the firm, the provision treats undistributed foreign profits as though they have been distributed while simultaneously requiring them to be included in the profits of a Nigerian company, potentially attracting income tax at 30 percent. It recommended clearer guidance on how foreign and local dividends should be taxed.
The firm also urged amendments to Section 6(1) of the NTAA to exempt non-resident companies from tax registration where their income is already subject to final withholding tax. KPMG said this would align with Section 11(3) of the Act, which exempts such companies from filing tax returns.
On withholding tax (WHT), KPMG recommended revising Section 17(3)(c) of the NTA to exempt insurance premiums paid to non-resident insurers. It argued that the current requirement for Nigerian residents to deduct WHT on such payments could discourage investment and reduce competitiveness.
KPMG further advised removing the restriction in Section 20(4) of the NTA that limits foreign exchange expense deductions to Central Bank of Nigeria (CBN) rates. Instead, the firm suggested measures to improve foreign exchange liquidity and enhance reporting standards.
The firm also called for the deletion of Section 21(p) of the NTA, stating that business expenses should remain tax-deductible if incurred wholly and exclusively for business purposes, regardless of whether value-added tax (VAT) has been paid.
On capital losses, KPMG said Section 27 of the NTA lacks clarity on how such losses should be treated and recommended clearer provisions on their deductibility.
Regarding personal income tax, the firm urged lawmakers to retain the former consolidated personal allowance under the Personal Income Tax Act (PITA), adjusted for inflation. It said the current N500,000 rent relief is inadequate and does little to ease the tax burden on individuals or encourage voluntary compliance.
KPMG also identified shortcomings in several other sections of the NTA, including Sections 39, 40, 47, 63(4), 72, 162, and 201, as well as parts of the First and Second Schedules. According to the firm, these provisions require further review to improve clarity, effectiveness, and alignment with policy objectives.
The proposed amendments, KPMG said, would help resolve issues related to chargeable gains, indirect transfers, tax exemptions, and sector-specific incentives, ultimately strengthening Nigeria’s tax framework.
