Global advisory firm KPMG has raised serious concerns over Nigeria’s newly enacted Nigeria Tax Act (NTA), identifying what it described as errors, inconsistencies, gaps and omissions that could undermine the objectives of the country’s sweeping tax reforms.
In a newsletter titled “Nigeria’s New Tax Laws: Inherent Errors, Inconsistencies, Gaps and Omissions,” KPMG acknowledged the potential of the new laws to modernise Nigeria’s tax administration but warned that several provisions require urgent correction.
According to the firm, while the reforms could significantly boost government revenue, there is a need to strike a balance between revenue generation and sustainable economic growth.
KPMG pointed to ambiguities in Section 17 of the NTA, which deals with taxation of non-resident companies. It noted that although the law states that withholding tax deducted at source should be final tax for non-residents without Permanent Establishment (PE) or Significant Economic Presence (SEP) in Nigeria, it does not clearly exempt such entities from tax registration.
The firm said this contradicts the intention of the law and could impose unnecessary compliance burdens on foreign companies.
Under Section 3 of the Act, KPMG observed contradictions in the treatment of undistributed foreign profits and dividends. While dividends from Nigerian companies are treated as franked investment income and not taxed further, dividends from foreign companies appear to attract full corporate income tax, creating unequal tax treatment.
KPMG also criticised Section 20(4), which allows expenses in foreign currency to be deducted only at the Central Bank of Nigeria’s official exchange rate. It said this could unfairly penalise businesses forced to source foreign exchange at higher market rates due to liquidity constraints.
Similarly, Section 21, which disallows tax deductions for expenses where VAT was not charged by suppliers, was described as unfair, as it could punish companies for failures beyond their control.
The firm further noted that the Act is unclear on whether capital losses other than those from digital assets are deductible and called for explicit clarification.
On small companies, KPMG warned that large firms may struggle to verify whether counterparties qualify for tax exemptions, recommending the introduction of a simple digital certification system.
KPMG urged the Federal Government to review the identified gaps and contradictions to ensure the tax reforms achieve their intended goals.
It also called for stronger international cooperation, improved tax administration capacity, better documentation by businesses, and upgraded digital and accounting systems to support compliance under the new tax regime.
