Concerns have emerged over Nigeria’s newly implemented tax regime after KPMG Nigeria identified what it described as major “errors, inconsistencies, gaps, and omissions” in the tax laws that came into effect on January 1, 2026. The professional services firm warned that leaving these issues unresolved could undermine the objectives of the reforms.
Nigeria’s tax overhaul is anchored on four major laws: the Nigeria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service (NRS) Establishment Act, and the Joint Revenue Board (JRB) Establishment Act. Signed into law by President Bola Ahmed Tinubu in June 2025, the reforms officially commenced in 2026 but have remained controversial since their introduction in October 2024.
Despite the criticism, government officials maintain that the reforms are necessary to improve Nigeria’s low tax-to-GDP ratio and modernise the country’s tax system to reflect changing economic realities.
In its review, KPMG outlined several problem areas, starting with capital gains taxation. The firm noted that Sections 39 and 40 of the Nigeria Tax Act require capital gains to be calculated using the difference between sale proceeds and the tax-written-down value of assets, without adjusting for inflation. KPMG said this approach is problematic in a high-inflation environment such as Nigeria’s, where headline inflation has remained in double digits for eight consecutive years.
According to the firm, taxing nominal gains could force investors to pay taxes on inflation-driven increases rather than real economic value. KPMG recommended introducing cost indexation to account for inflation, arguing that this would reduce distortions while still allowing government to collect revenue from genuine capital appreciation.
KPMG also raised concerns about Section 47 of the Act, which taxes gains from indirect transfers by non-residents where Nigerian assets or companies are involved. The firm warned that the provision could further dampen foreign investment at a time when inflows remain below pre-2019 levels. While similar rules exist globally, KPMG said Nigeria needs clearer thresholds and detailed administrative guidance to prevent disputes and reduce negative impacts on foreign investors.
Another issue relates to restrictions on deducting foreign exchange expenses. Under Section 24 of the Act, businesses cannot deduct foreign-currency costs beyond their naira equivalent at the official Central Bank of Nigeria exchange rate. KPMG argued that this unfairly penalises companies forced to source FX from the parallel market due to limited official supply, effectively increasing taxable profits. The firm advised allowing deductions based on actual documented costs.
The firm further criticised Section 21(p) of the Act, which disallows deductions for expenses where VAT was not charged, even if the expenses were wholly business-related. Given Nigeria’s large informal sector and VAT compliance challenges, KPMG said the rule shifts enforcement responsibility onto compliant taxpayers and should either be removed or substantially amended.
KPMG also pointed to uncertainty surrounding the tax obligations of non-resident companies. While the Nigeria Tax Act recognises withholding tax as final in certain cases, the Nigeria Tax Administration Act does not clearly exempt such entities from registration and filing requirements. The firm warned that these inconsistencies, alongside Nigeria’s double taxation treaties, could discourage foreign participation.
KPMG recommended harmonising the NTA and NTAA to clearly exempt non-resident companies whose obligations have been fully settled through withholding tax. According to the firm, such alignment would simplify compliance, boost investor confidence, and support cross-border transactions.
The firm concluded that the success of Nigeria’s most ambitious tax reform in decades will depend on clarity, consistency, and alignment with international best practices. Without timely amendments, businesses may face higher costs, foreign investors could remain wary, and capital markets may continue to experience volatility.