THIS DAWN — KPMG Nigeria has identified significant errors, inconsistencies, and gaps in the country’s newly enacted tax laws, raising concerns about clarity, compliance, and effective implementation.
The firm’s review, published January 9, 2026, highlights technical drafting issues, conflicting provisions, and omissions that could undermine Nigeria’s fiscal reforms if not urgently addressed.
Nigeria’s sweeping new tax laws, effective January 2026, were designed to modernize revenue collection and streamline administration.
Among the changes was the renaming of the Federal Inland Revenue Service (FIRS) to the Nigeria Revenue Service (NRS), alongside broader reforms intended to improve efficiency and transparency.
However, KPMG’s analysis suggests that the legislation, while ambitious, suffers from poor drafting and structural flaws.
These shortcomings risk creating confusion for taxpayers, regulators, and enforcement agencies.
Key Findings by KPMG
KPMG’s review identified several critical issues:
- Errors in Drafting: Certain sections contain typographical mistakes and misnumbered clauses that could complicate interpretation.
- Inconsistencies Across Provisions: Conflicting language between sections of the law may lead to disputes over enforcement.
- Gaps in Coverage: Important areas of tax administration, such as digital economy taxation and cross-border compliance, are insufficiently addressed.
- Ambiguities in Definitions: Key terms are either undefined or inconsistently applied, leaving room for multiple interpretations.
- Compliance Risks: Businesses may struggle to align with unclear provisions, increasing the likelihood of litigation and revenue leakage.
Implications for Stakeholders
For Government:
- The credibility of Nigeria’s fiscal reforms could be undermined if errors are not corrected.
- Enforcement agencies may face challenges in applying ambiguous provisions, weakening compliance.
For Businesses:
- Companies risk penalties due to unclear obligations.
- Multinationals may face uncertainty in cross-border transactions, affecting investment confidence.
For Citizens:
- Confusion over tax obligations could erode trust in government reforms.
- Potential delays in implementation may affect public services reliant on tax revenues.
Expert Commentary
Tax professionals warn that the identified flaws could stall Nigeria’s efforts to modernize its tax system.
Analysts argue that reforms must be accompanied by robust stakeholder consultation, transparent drafting, and timely corrections.
KPMG report emphasized that while reforms are necessary, technical precision is critical to ensure laws are enforceable and equitable.
- Legislative Review: Lawmakers may need to revisit the tax laws to correct errors and close gaps.
- Stakeholder Engagement: Government should consult with tax experts, businesses, and civil society to refine provisions.
- Capacity Building: Training for enforcement agencies will be essential to navigate ambiguities until corrections are made.
- Public Communication: Clear guidance should be issued to taxpayers to prevent confusion during implementation.
Nigeria’s new tax laws represent a bold attempt to overhaul fiscal governance.
Yet, KPMG’s findings reveal that technical flaws threaten to derail the reforms unless urgent corrective action is taken.
For Nigeria to achieve its revenue goals and maintain investor confidence, clarity, consistency, and transparency must be prioritized in the legal framework.
Summary
See below a summary of the KPMG observations on the new tax laws by DonAza:
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The new tax laws contain errors.
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The laws contain inconsistencies.
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There are gaps and omissions in the laws.
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Some provisions lack clarity.
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The rules on taxation of non-resident persons are unclear.
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The law does not clearly exempt non-residents without Permanent Establishment (PE) or Significant Economic Presence (SEP) from tax registration.
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The law is unclear on whether communities are subject to tax or exempt.
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The rules on Controlled Foreign Companies (CFC) lack clarity.
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The treatment of undistributed foreign profits is unclear.
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Dividends from foreign companies may be taxed differently from Nigerian company dividends.
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Insurance premiums paid to non-residents should not be subject to withholding tax.
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The rules on allowable tax deductions are restrictive.
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Forex expenses are deductible only at the official CBN exchange rate, even when forex is bought at higher rates.
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Business expenses without VAT charged are disallowed as tax deductions, even when validly incurred.
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Capital losses (except digital or virtual assets) are not clearly stated as deductible.
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Deductible items for individuals are limited.
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The rent relief cap of ₦500,000 is too small.
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High-income earners may face oppressive taxation.
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Over-taxation may lead to non-compliance and capital flight.
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The tax law may discourage investment, entrepreneurship, and job creation.
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Tax authorities need international cooperation and capacity building.
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Businesses need to review their tax exposure and compliance systems.
