Fresh concerns have emerged over Nigeria’s newly implemented tax framework following a review by KPMG Nigeria, which identified what it described as “errors, inconsistencies, gaps and omissions” in the laws that took effect on January 1, 2026.
In a statement released on Thursday, the professional services firm warned that unless the identified issues are addressed, the overarching objectives of the tax reforms could be undermined.
Nigeria’s tax overhaul is anchored on four key legislations: the Nigeria Tax Act, the Nigeria Tax Administration Act, the Nigeria Revenue Service Establishment Act and the Joint Revenue Board Establishment Act. The laws, signed by President Bola Ahmed Tinubu in June 2025, formally commenced in 2026 but have remained controversial since their introduction in October 2024.
Despite the criticism, government officials have maintained that the reforms are critical to boosting Nigeria’s low tax-to-GDP ratio and modernising the country’s tax system in line with changing economic realities.
In its detailed review, KPMG highlighted several contentious areas, beginning with capital gains taxation. The firm raised concerns over Sections 39 and 40 of the Nigeria Tax Act, which require capital gains to be computed as the difference between sale proceeds and the tax-written-down value of assets, without accounting for inflation.
KPMG noted that this approach is problematic in a high-inflation environment. Data from the National Bureau of Statistics shows that headline inflation has remained in double digits for eight consecutive years, averaging over 18 per cent between 2022 and 2025, while asset prices have been heavily influenced by currency depreciation and rising general prices.
Market indicators also reflect investor sensitivity to tax policy shifts. Although the NGX All-Share Index gained more than 50 per cent over the year and market capitalisation approached N99.4tn, equities recorded sharp sell-offs in late 2025. In November alone, market value reportedly fell by about N6.5tn amid uncertainty surrounding the new capital gains tax regime.
KPMG warned that taxing nominal gains could result in investors paying tax on inflation-driven increases rather than real economic gains. It recommended the introduction of a cost indexation mechanism to adjust asset values for inflation, arguing that this would reduce distortions while preserving government revenue from genuine capital appreciation.
The firm also expressed concern over Section 47 of the Act, which subjects gains from indirect transfers by non-residents to Nigerian tax where transactions affect ownership of Nigerian companies or assets. This, it noted, comes at a time when foreign direct investment inflows remain below pre-2019 levels, according to figures from the United Nations Conference on Trade and Development.
While acknowledging that similar rules exist in other jurisdictions, KPMG observed that they are often supported by clear thresholds and detailed guidance. It advised Nigerian tax authorities to issue comprehensive administrative guidelines to clarify scope, thresholds and reporting obligations to reduce disputes and limit adverse effects on foreign investment.
Another issue identified relates to Section 24 of the Act, which restricts businesses from deducting foreign currency expenses beyond their naira equivalent at the official Central Bank of Nigeria exchange rate. KPMG observed that limited access to official foreign exchange forces many companies to source FX at higher parallel market rates, making the additional cost non-deductible and effectively increasing tax liabilities.
Although the provision aims to curb FX speculation, the firm said it fails to reflect prevailing supply constraints. It recommended allowing deductions based on actual costs incurred, subject to proper documentation, to avoid penalising businesses for circumstances beyond their control.
KPMG further criticised Section 21(p) of the Act, which disallows deductions on expenses where VAT was not charged, even if such costs were wholly business-related. Given Nigeria’s large informal sector and persistent VAT compliance gaps, the firm argued that the rule unfairly shifts part of the VAT enforcement burden onto compliant taxpayers. It advised that the provision be removed or significantly amended.
The review also highlighted ambiguities around the compliance obligations of non-resident companies. While the Nigeria Tax Act recognises withholding tax as final tax for certain payments in the absence of a permanent establishment or significant economic presence, the Nigeria Tax Administration Act does not clearly exempt such entities from registration and filing requirements.
KPMG warned that inconsistencies between the two laws could create uncertainty, particularly in light of Nigeria’s double taxation treaties with countries such as the United Kingdom, South Africa, Canada and France. It recommended harmonising the relevant provisions, with explicit exemptions for non-resident companies whose tax obligations have been fully settled through withholding tax.
As Nigeria embarks on what it described as its most extensive tax reform in decades, KPMG concluded that the success of the overhaul would depend on clarity, consistency and alignment with international best practices, warning that delays in addressing the issues could heighten business costs, deter foreign investors and fuel market volatility.
According to Daily Post recalled that KPMG’s concerns come after a lawmaker, Abdulsamman Dasuki, raised alarm over alleged alterations to the gazetted tax laws.
