KPMG Nigeria has raised concerns over what it described as “errors, inconsistencies, gaps and omissions” in Nigeria’s new tax laws, warning that unresolved issues could weaken the reforms’ ability to achieve their stated objectives. The professional services firm said the problems, identified in the laws that took effect at the start of the year, may undermine efforts to boost revenue, simplify tax administration and improve Nigeria’s investment competitiveness.
The reforms are anchored on the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act (NTAA), alongside the Nigeria Revenue Service (NRS) Establishment Act and the Joint Revenue Board (JRB) Establishment Act. Authorities have positioned the overhaul as a key response to Nigeria’s weak tax-to-GDP ratio and the need to modernise the tax system in line with evolving economic realities.
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One of KPMG’s most significant concerns relates to capital gains taxation under Sections 39 and 40 of the Nigeria Tax Act. The provisions require chargeable gains to be calculated as the difference between sale proceeds and the tax-written-down value of assets, without adjusting for inflation. In a country where headline inflation has remained in double digits for eight consecutive years and averaged above 18 percent between 2022 and 2025, KPMG warned that this approach could result in taxpayers being assessed on inflation-driven gains rather than real economic value. The firm recommended the introduction of a cost indexation allowance to adjust asset values for inflation, arguing that this would reduce distortions while still allowing the government to tax genuine capital appreciation.
Market behaviour in late 2025 highlighted investor sensitivity to tax policy uncertainty. Despite a strong full-year rally that saw the NGX All-Share Index gain over 50 percent and market capitalisation approach N99.4 trillion, the equities market experienced heavy sell-offs toward year-end. In November alone, market value fell by about N6.5 trillion amid uncertainty surrounding the new capital gains tax rules, underscoring the impact of policy ambiguity on investor confidence.
KPMG also flagged risks associated with the indirect transfer provisions in Section 47 of the Nigeria Tax Act, which subject gains from indirect transfers of shares or assets by non-residents to Nigerian tax if they result in changes in ownership of Nigerian companies or assets. The provision is being introduced at a time when foreign direct investment inflows remain below pre-2019 levels. While similar rules exist in other jurisdictions, KPMG noted that they are typically supported by detailed guidance and clear thresholds. The firm recommended that Nigerian tax authorities issue comprehensive administrative guidance to reduce uncertainty, limit disputes and mitigate potential negative effects on foreign investment.
Another area of concern is Section 24 of the Act, which restricts the deductibility of foreign-currency expenses to their naira equivalent at the official CBN exchange rate. Given limited access to official foreign exchange, many businesses source FX at higher parallel market rates, meaning the excess cost becomes non-deductible and effectively increases taxable profits. KPMG warned that while the rule aims to curb speculative FX activity, it does not reflect market realities and could unfairly penalise businesses. The firm recommended allowing deductions based on actual costs incurred, subject to proper documentation.
The firm further criticised Section 21(p), which disallows deductions for expenses on which value-added tax has not been charged, even when such expenses are wholly incurred for business purposes. Given Nigeria’s large informal sector and persistent VAT compliance gaps, analysts say the provision shifts part of the enforcement burden onto compliant taxpayers. KPMG recommended deleting or substantially modifying the section, arguing that VAT enforcement should be addressed through audits and penalties on defaulting suppliers rather than through income tax disallowances.
Uncertainty around non-resident taxation was another issue highlighted. While the Nigeria Tax Act provides that withholding tax constitutes final tax for certain non-resident payments where there is no permanent establishment or significant economic presence, the Nigeria Tax Administration Act does not clearly exempt such entities from registration or filing obligations. KPMG warned that this lack of alignment, especially in the context of Nigeria’s double taxation treaties, could increase compliance friction and deter cross-border investment. The firm called for explicit harmonisation of the two laws to exempt non-residents whose Nigerian tax obligations have been fully settled through withholding tax.
As Nigeria embarks on its most comprehensive tax overhaul in decades, KPMG said the success of the reforms will depend on clarity, consistency and alignment with international best practices. Without timely amendments and clear guidance, the firm warned that businesses could face higher costs, foreign investors may remain cautious, and capital markets could continue to experience volatility, undermining the broader goal of sustainable economic growth.
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