KPMG Flags Multiple Errors, Gaps in New Tax Laws, Seeks ‘Urgent’ Review

KPMG, a global network of professional services firms, has raised serious concerns over Nigeria’s newly enacted tax laws, warning that multiple errors, inconsistencies, gaps, omissions, and lacunae could undermine the objectives of the reforms if not urgently addressed.

The firm disclosed this in its latest newsletter following a detailed review of the New Tax Act (NTA), 2025, and the Nigeria Tax Administration Act (NTAA), 2025.

KPMG Identifies Ambiguity in Taxable Persons

According to KPMG, Section 3(b) and (c) of the NTA specifies persons on whom taxes may be imposed but fails to include the term “community”, despite its inclusion in the Act’s definition of a person.

The professional services firm warned that this omission could create uncertainty in tax administration and enforcement.

KPMG therefore recommended that communities should be explicitly included or clearly exempted from tax obligations to avoid ambiguity.

Risk of Double Taxation Under Controlled Foreign Company Rules

KPMG also raised concerns about Section 6(2) of the NTA, which deals with controlled foreign companies.

The firm said the provision could result in double taxation, as the Act states that undistributed foreign profits are to be “construed as distributed” while simultaneously requiring such profits to be included in the taxable profits of a Nigerian company.

This, according to KPMG, implies income tax at the rate of 30 percent, creating confusion over the treatment of foreign and local dividends.

The firm advised that the section be amended to provide clearer guidance and prevent unintended tax burdens.

Tax Registration Exemption Needed for Non-Resident Companies

On tax administration, KPMG said Section 6(1) of the NTAA, 2025 should be amended to exempt non-resident companies whose income is subject to final withholding tax from tax registration requirements.

The firm explained that such an amendment would align with Section 11(3) of the NTAA, which already exempts these companies from filing tax returns.

KPMG noted that the inconsistency creates unnecessary compliance obligations for affected entities.

Withholding Tax and Foreign Exchange Provisions

Addressing withholding tax (WHT), KPMG recommended that Section 17(3)(c) of the NTA be amended to exempt insurance premiums paid to non-resident companies.

The firm argued that requiring Nigerian residents to deduct WHT on such payments discourages economic activity and reduces competitiveness.

KPMG also advised the removal of the condition in Section 20(4) of the NTA that restricts foreign exchange expense deductions to rates prescribed by the Central Bank of Nigeria (CBN).

Instead, it suggested focusing on improving foreign exchange liquidity and strengthening reporting requirements.

Concerns Over VAT, Capital Losses, and Personal Income Tax

KPMG further recommended expunging Section 21(p) of the NTA, which disallows certain expenses for tax purposes where value-added tax (VAT) remains unpaid.

The firm proposed that expenses should be deductible if they are incurred wholly and exclusively for business purposes, regardless of VAT payment status.

On capital losses, KPMG said Section 27 of the NTA lacks clarity on how such losses should be deducted and requires amendment.

Regarding personal income taxation, the firm advised retaining the former consolidated personal allowance under the Personal Income Tax Act (PITA), adjusted for inflation.

KPMG noted that the current N500,000 rent relief is inadequate and does not fairly balance the tax burden on individuals or promote voluntary compliance.

Additional Gaps Identified Across Multiple Sections

KPMG identified further gaps in Sections 39, 40, 47, 63(4), 72, 162, 196, and 201 of the NTA, as well as provisions in the First and Second Schedules.

The firm said these sections require review to improve clarity around:

• Computation of chargeable gains
• Indirect transfers
• Tax exemptions
• Industry-specific incentives

KPMG also called for amendments to Paragraphs 5 and 9 of the Second Schedule, the Ninth Schedule on stamp duties, and the Twelfth Schedule on partnerships and pensions.

Call for Simplified Certification and Balanced Reform

The firm further recommended introducing a simplified certification process through Tax-Pro Max to enable small companies to easily verify their status to counterparties.

According to KPMG, this would address challenges faced by larger companies in confirming the “small company” status of their business partners.

In conclusion, KPMG urged the government to urgently review all inconsistencies in the new tax laws to strike a balance between revenue generation and sustainable economic growth.

The firm also advised businesses to assess the impact of the new laws on their operations and ensure adequate compliance and documentation readiness.