Amanze Chinonye
KPMG Nigeria has identified significant errors, omissions, and inconsistencies in Nigeria’s newly enacted 2026 tax laws, raising concerns about potential impacts on compliance, investment, and economic growth, Prime Business Africa reports.
The reforms, which include the Nigeria Tax Act (NTA) and Nigeria Tax Administration Act (NTAA), became effective on 1 January 2026, alongside the Nigeria Revenue Service Establishment Act (NRSEA) and the Joint Revenue Board Establishment Act (JRBEA).
The National Assembly recently released “certified” versions of the Acts to resolve discrepancies between the bills passed and the Gazetted Acts, though KPMG notes that the effectiveness of these corrections remains uncertain.
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Nigeria’s New Tax Law: Why Doubts Are Growing
The new laws aim to promote equity, fairness, simplified administration, competitiveness, and economic growth, while generating revenue and curbing tax avoidance. However, KPMG’s analysis highlights areas where the legislation could undermine these objectives.
Among the key concerns are:
- Tax Imposition and Definitions: Section 3(b)&(c) of the NTA omits “community” from the list of taxable entities, despite its inclusion elsewhere in the law. KPMG recommends clarifying whether communities are taxable or exempt.
- Controlled Foreign Companies: Foreign dividends are taxed differently from local dividends, creating potential double taxation and compliance confusion.
- Non-resident Taxation: KPMG flagged ambiguities in the taxation and filing obligations for non-residents with no permanent establishment or significant economic presence, and inconsistencies between withholding tax and VAT rules for insurance premiums.
- Deductions and Profit Computation: The law limits deductions for expenses in foreign currencies and disallows certain VAT-related expenses. Capital losses outside digital assets remain unclear. KPMG suggests adjustments to allow all bona fide business expenses and introduce cost indexation to account for inflation in capital gains.
- Individual Income Tax: Personal allowances are minimal, risking over-taxation of high-income earners. KPMG recommends retaining previous allowances to encourage voluntary compliance and fairness.
- Indirect Transfers and Investment Climate: Section 47’s tax on indirect transfers of shares could deter foreign investment. Experts warn this may reduce Nigeria’s competitiveness.
- Hydrocarbon Tax and Collective Investments: Offshore hydrocarbon operations and collective investment schemes face unclear tax treatment, potentially exposing investors to double taxation.
- Export Processing and Free Trade Zones: The law lacks clarity on the taxation of profits and services in free trade and export processing zones.
- Governance and Compliance: KPMG highlighted that the Joint Revenue Board’s current composition is insufficiently independent to provide unbiased assessments of tax policies. Furthermore, verification processes for small companies, individual tax filing deadlines, and VAT return extensions require urgent clarification.
In its conclusion, KPMG stresses that while the new tax laws have the potential to modernize Nigeria’s tax system and increase revenue, urgent amendments are needed to resolve ambiguities, safeguard investments, and maintain economic growth.
The firm recommends that businesses conduct comprehensive impact analyses, train staff on the new regulations, maintain thorough documentation, and ensure ERP and payroll systems are aligned with the new tax framework. At the same time, government intervention is urged to clarify critical provisions, harmonize conflicting sections, and strengthen oversight structures.
KPMG warned that without these adjustments, Nigeria risks overburdening taxpayers, deterring investment, and undermining the very objectives of its ambitious 2026 tax reforms.
Amanze Chinonye is a Staff Correspondent at Prime Business Africa, a rising star in the literary world, weaving captivating stories that transport readers to the vibrant landscapes of Nigeria and the rest of Africa. With a unique voice that blends with the newspaper's tradition and style, Chinonye's writing is a masterful exploration of the human condition, delving into themes of identity, culture, and social justice. Through her words, Chinonye paints vivid portraits of everyday African life, from the bustling markets of Nigeria's Lagos to the quiet villages of South Africa's countryside . With a keen eye for detail and a deep understanding of the complexities of Nigerian society, Chinonye's writing is both a testament to the country's rich cultural heritage and a powerful call to action for a brighter future. As a writer, Chinonye is a true storyteller, using her dexterity to educate, inspire, and uplift readers around the world.
