…Says Errors Emerge in New Tax Framework
KPMG, the international professional services firm, has warned that Nigeria’s newly enacted tax laws contain significant flaws that could undermine their effectiveness if left unaddressed.
The firm, in a newsletter assessing the New Tax Act (NTA) 2025, said its review uncovered a range of issues, including drafting errors, inconsistencies, omissions and structural gaps that require immediate attention.
KPMG highlighted specific provisions it believes should be reviewed and amended to ensure the legislation delivers on its intended policy and economic objectives.
According to the newsletter, Section 3(b) and (c) of the NTA specifies persons on whom taxes may be imposed but omits the term ‘community’, despite its inclusion in the definition of a ‘person’.
KPMG also advised that the New Tax Act should clearly state whether communities are to be included or excluded from taxation, warning that the current wording leaves room for uncertainty and possible disputes.
The firm further raised concerns about Section 6(2) of the Act, which deals with controlled foreign companies, noting that the provision could unintentionally expose taxpayers to double taxation. KPMG said the law needs clearer guidance on how foreign and local dividends should be treated.
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According to the firm’s analysis, the Act provides that undistributed profits earned offshore are to be treated as if they have been distributed, while at the same time requiring such profits to be added to the taxable income of the Nigerian parent company.
KPMG warned that this approach could effectively subject the same income to corporate tax at the standard rate of 30 per cent, unless the provision is revised.
KPMG also called for changes to Section 6(1) of the Nigeria Tax Administration Act (NTAA) 2025, recommending that non-resident companies whose earnings are already subject to final withholding at source should not be required to register for tax.
The firm noted that such an amendment would bring the provision in line with Section 11(3) of the same law, which already excuses those entities from submitting tax returns.
On withholding tax, KPMG urged lawmakers to review Section 17(3)(c) of the New Tax Act, suggesting that insurance premiums paid to foreign companies should be excluded from WHT obligations.
According to the firm, forcing Nigerian residents to deduct withholding tax on such payments could undermine business competitiveness and discourage investment.
KPMG further proposed the removal of the clause in Section 20(4) of the Act that restricts the deduction of foreign exchange losses or expenses to rates prescribed by the Central Bank of Nigeria. The firm argued that the limitation does not reflect market realities and could distort the true cost of doing business.
Instead of the current approach, KPMG advised policymakers to prioritise measures that enhance market liquidity and tighten disclosure and reporting standards.
The firm also recommended the removal of Section 21(p) of the New Tax Act, arguing that business expenses should qualify for tax deductions as long as they are incurred wholly and exclusively in the course of business, irrespective of whether value-added tax has been settled.
On capital losses, KPMG proposed a revision of Section 27 of the Act to clearly outline the method and conditions under which such losses can be offset, noting that the existing wording leaves room for uncertainty and inconsistent interpretation.
Addressing personal income tax, the firm further suggested that Section 30 of the New Tax Act should preserve the previously consolidated personal allowance provided under the Personal Income Tax Act, with appropriate adjustments to reflect inflationary pressures.
The company said the current N500,000 rent relief is insignificant and does not adequately balance the tax burden on individuals or promote voluntary compliance.
The firm identified additional gaps in Sections 39, 40, 47, 63(4), 72, 162, 196, and 201 of the NTA, as well as parts of the First and Second Schedules, calling for the review of the provisions to improve clarity and effectiveness.
