KPMG flags five major errors in Nigeria's new tax laws

KPMG Nigeria has flagged five critical errors in the new tax laws that took effect January 1, 2026, warning these issues could undermine the reforms' objectives. The laws—Nigeria Tax Act, Nigeria Tax Administration Act, Nigeria Revenue Service Act, and Joint Revenue Board Act—were signed by President Tinubu in June 2025.

First, capital gains tax sections (39 and 40) don't adjust for inflation. With inflation averaging over 18% between 2022-2025, investors could pay tax on inflation-driven gains rather than real appreciation. KPMG recommends a cost indexation mechanism.

Second, Section 47's rules on indirect transfers by non-residents lack clear guidance. This comes as FDI remains below pre-2019 levels. KPMG urges detailed administrative guidelines to avoid disputes and limit negative investment effects.

Third, Section 24 restricts foreign currency expense deductions to official CBN rates. Since many businesses access FX at higher parallel market rates, the difference becomes non-deductible, increasing taxable profits unfairly. KPMG recommends allowing deductions based on actual documented costs.

Fourth, Section 21(p) disallows expense deductions where VAT wasn't charged, even for business-related costs. This shifts VAT enforcement burden onto compliant taxpayers. KPMG advises removing this provision.

Finally, inconsistencies between the Nigeria Tax Act and Nigeria Tax Administration Act create uncertainty for non-resident companies. While withholding tax is meant to be final for certain payments, the administration act doesn't clearly exempt these entities from registration requirements. KPMG recommends harmonizing provisions and explicit exemptions for companies whose tax obligations are fully settled through withholding tax.

Without timely amendments, businesses face higher costs, foreign investors remain cautious, and capital markets may continue experiencing volatility.

SOURCE: https://dailypost.ng/2026/01/09/kpmg-flags-five-major-errors-in-nigerian-tax-laws/