Summary:
A detailed review by KPMG Nigeria reveals significant legislative loopholes in the newly gazetted tax laws effective January 2026, warning of compliance hurdles for businesses regarding foreign dividends, non-resident obligations, and community taxation.
The implementation of Nigeria’s new fiscal structure has hit a stumbling block as professional services firm KPMG Nigeria has raised red flags regarding the integrity of the recently gazetted tax laws. In a critical review of the legislative documents—which took effect on January 1, 2026—the firm identified severe errors, inconsistencies, and omissions that could plunge the business environment into a state of regulatory confusion.
The audit focused on the Nigeria Tax Act (NTA) and the Nigeria Tax Administration Act, along with their establishment acts. According to the report, these legislative oversights threaten to undermine the very objectives of fairness and efficiency the reforms aimed to achieve.
The “Community” Ambiguity
One of the primary concerns highlighted involves the definition of taxable entities. The report points out a lacuna in Section 3(b)&(c) of the NTA. While the law lists various taxable persons, it inexplicably omits the term “community.” This exclusion creates a grey area, leaving tax administrators and payers unsure if communities remain liable for taxation or if they have been silently exempted.
The Dividend Disparity
Multinational corporations and investors face potential hurdles regarding dividend taxation. KPMG flagged Section 6(2), noting a discrepancy that could see foreign dividends taxed at a significantly different rate compared to domestic ones. The current wording suggests foreign dividends may be treated as standard income, creating an uneven playing field between Nigerian companies and their international counterparts.
Non-Resident Compliance Traps
The report further warns of operational bottlenecks for non-resident companies. Under Section 17(3)(b) and (c), entities without a Permanent Establishment or Significant Economic Presence appear to face ambiguous requirements regarding tax registration. KPMG argues that forcing such entities to file returns without clear exemptions creates unnecessary bureaucratic friction.
Forex and VAT Deduction Limits
Perhaps most concerning for businesses navigating a volatile economy are the restrictions found in Sections 20 and 21. These clauses limit foreign currency expense deductions to the official Central Bank rate and disallow expenses where VAT has not been charged. KPMG advises that in the current economic climate, policy should prioritize liquidity rather than restrictive forex tracking.
The Path Forward
The consensus is that these legislative gaps could severely hamper financial reporting and tax planning for both local and global firms. KPMG has called for urgent amendments from the National Assembly to align the certified Acts with the realities of modern business, warning that without clarification, the nation risks a period of protracted litigation and compliance failure.
