In the ever-evolving landscape of Nigeria’s fiscal policy, KPMG Nigeria has raised a critical alarm regarding the newly enacted tax laws.
In a detailed newsletter, the global consulting firm identified several “errors, inconsistencies, and gaps” within the New Tax Act (NTA) 2025 and the Nigeria Tax Administration Act (NTAA) 2025.
According to KPMG, if these “lacunae” are not urgently addressed, they could undermine the very objectives the government hopes to achieve. Here is a breakdown of the key areas KPMG believes require immediate reconsideration to protect businesses and the economy.
Ambiguities in Tax Identity and Double Taxation
One of the primary concerns raised by KPMG involves the definition of taxable entities.
- The “Community” Omission: While the law defines a “person” to include a “community,” Sections 3(b) and (c) of the NTA fail to mention communities when specifying who is actually liable for tax. KPMG recommends explicit clarification to avoid legal confusion.
- Foreign Income Risks: The firm warned that Section 6(2) of the NTA could lead to double taxation for Nigerian companies with foreign subsidiaries. Currently, the law implies that undistributed foreign profits could be taxed at 30%, potentially penalizing global business expansion.
Hurdles for Global Trade and Insurance
KPMG highlighted specific provisions that could make Nigeria less competitive on the global stage:
- Insurance Premiums: Under Section 17, Nigerians are required to deduct Withholding Tax (WHT) on insurance premiums paid to non-residents. KPMG argues this should be scrapped to encourage economic growth.
- Non-Resident Registration: The firm suggests that foreign companies whose only Nigerian income is already taxed at the source (final WHT) should be exempt from the stress of full tax registration.
- The Forex Rate Trap: Currently, Section 20(4) limits tax deductions for foreign exchange expenses to official CBN rates. KPMG advises removing this restriction, suggesting that the focus should instead be on improving market liquidity.
- Corporate Deductions and Small Business Support: The review also touched on the day-to-day operations of Nigerian firms:
Corporate Deductions and Small Business Support
The review also touched on the day-to-day operations of Nigerian firms:
- The VAT Connection: KPMG proposed removing Section 21(p), which prevents businesses from deducting expenses if VAT wasn’t paid on them. They argue that if an expense was incurred purely for business, it should be deductible regardless.
- Small Business Certification: To help larger companies deal with smaller partners, KPMG suggested a simplified certification process via Tax-Pro Max. This would allow small firms to easily verify their tax status to their clients.
- Capital Loss Clarity: The firm noted that the current rules for deducting capital losses (Section 27) are vague and need a clearer framework.
Impact on Individuals and Personal Income Tax
KPMG didn’t just focus on big corporations; they also flagged issues affecting the average Nigerian worker:
- Impact on Individuals and Personal Income Tax
KPMG didn’t just focus on big corporations; they also flagged issues affecting the average Nigerian worker: - Rent Relief: The firm described the current N500,000 rent relief as “insignificant,” noting that it does little to ease the tax burden on individuals in today’s economy.
- Inflation-Adjusted Allowances: They recommended that the former consolidated personal allowance be retained but adjusted for inflation to ensure voluntary tax compliance remains high.
The firm also identified a long list of other sections (including Sections 39, 47, and 72) that require review to improve clarity on industry-specific incentives and chargeable gains.
According to KPMG, the government must strike a delicate balance between aggressive revenue generation and sustainable economic growth.
