Global professional services firm KPMG has identified significant deficiencies in Nigeria’s recently enacted tax legislation, describing “errors, inconsistencies, gaps, omissions, and lacunae” that demand immediate attention to prevent undermining the laws’ intended objectives.
In a detailed newsletter reviewing the New Tax Act (NTA) 2025, KPMG highlighted numerous provisions requiring revision. The firm noted that Section 3(b) and (c) of the NTA specifies taxable entities but conspicuously excludes ‘community’ despite its inclusion in the definition of a ‘person’. KPMG urged lawmakers to either explicitly include communities as taxable entities or formally exempt them to eliminate ambiguity.
The professional services firm also raised concerns about potential double taxation under Section 6(2) of the NTA, which governs controlled foreign companies. KPMG pointed out that the Act simultaneously treats undistributed foreign profits as “construed as distributed” while requiring such profits to be “included in the profits of the Nigerian company,” potentially subjecting them to a 30 percent income tax rate. The firm recommended amendments to clarify how foreign and local dividends should be treated.
EXEMPTIONS FOR NON-RESIDENT COMPANIES PROPOSED
KPMG proposed that Section 6(1) of the Nigeria Tax Administration Act (NTAA) 2025 should exempt non-resident companies whose income faces final tax deduction at source from registration requirements. This change would harmonize with Section 11(3) of the NTAA, which already exempts such entities from filing tax returns.
Regarding withholding tax, KPMG argued that Section 17(3)(c) of the NTA should exempt insurance premiums paid to non-residents from deduction requirements, contending that the current mandate for Nigerian residents to deduct withholding tax hampers economic growth and competitiveness.
The firm further advised eliminating the restriction in Section 20(4) of the NTA that limits foreign exchange expense deductions to Central Bank of Nigeria rates, suggesting instead that authorities focus on enhancing liquidity and strengthening reporting mechanisms. Additionally, KPMG recommended removing Section 21(p) of the NTA, arguing that business expenses should qualify for tax deductions if incurred wholly and exclusively for business purposes, irrespective of unpaid value-added tax.
On capital losses, the firm called for modifications to Section 27 of the NTA to provide explicit guidance on deduction methods, as the existing provision lacks precision.
Addressing personal income taxation, KPMG recommended that Section 30 of the NTA restore the previous consolidated personal allowance from the Personal Income Tax Act, with inflation adjustments. The firm characterized the current N500,000 rent relief as inadequate, arguing it fails to equitably distribute the tax burden or encourage voluntary compliance.
KPMG identified additional deficiencies in Sections 39, 40, 47, 63(4), 72, 162, 196, and 201 of the NTA, along with portions of the First and Second Schedules, urging comprehensive review to enhance clarity and effectiveness. The suggested revisions would address issues concerning chargeable gains computation, indirect transfers, tax exemptions, and sector-specific incentives.
The firm also recommended revising Paragraphs 5 and 9 of the Second Schedule, the Ninth Schedule on stamp duties, the Twelfth Schedule covering partnerships and pensions, Sections 13, 22(2), and 22(9) of the NTAA, and Section 5 of the Joint Revenue Board Establishment Act.
To address practical compliance challenges, KPMG proposed establishing a streamlined certification process through Tax-Pro Max, enabling small companies to verify their status to business partners. The firm noted this would resolve difficulties larger companies encounter when confirming the “small company” classification of their counterparties.
KPMG urged the government to address all inconsistencies in the new tax framework to achieve equilibrium between revenue generation and sustainable economic development, while advising businesses to evaluate the legislation’s impact on their operations and ensure robust compliance and documentation systems.
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