KPMG has warned that flaws, inconsistencies, and omissions in Nigeria’s new tax laws could trigger disputes, discourage investment, and accelerate capital flight if left unaddressed.
The advisory firm raised the concerns in a recent report reviewing the Nigeria Tax Act, which came into effect on January 1, 2026. According to the report, several provisions of the law lack clarity or are misaligned with policy objectives, creating uncertainty for taxpayers and tax authorities.
One of the key issues identified relates to how companies determine total profits under the Act. KPMG noted that the law does not clearly state whether capital losses, aside from those arising from digital or virtual assets, are deductible for tax purposes. While the firm believes the intention is to allow such deductions, the absence of explicit wording could result in conflicting interpretations and potential disputes.
KPMG warned that uncertainty around deductibility may expose businesses to prolonged engagements with tax authorities, increasing compliance costs and litigation risks. It advised the Federal Government to amend the law to clearly specify the treatment of capital losses.
Concerns were also raised about provisions governing individual chargeable income. Under the current framework, allowable deductions are limited to statutory contributions and a narrow set of reliefs, including rent relief capped at N500,000 annually. KPMG said the restricted scope of deductions, combined with expanded tax bands and rates, could be viewed as oppressive, particularly by higher-income earners.
The firm cautioned that when taxpayers perceive tax laws as punitive, it can drive noncompliance and encourage wealthy individuals and investors to relocate to lower-tax jurisdictions, undermining Nigeria’s revenue base.
Further scrutiny was directed at the capital gains provisions, which calculate taxable gains as the difference between sale proceeds and the tax-written-down value of assets, without adjusting for inflation. In a high-inflation environment, KPMG said this approach could result in significant tax liabilities even where real economic gains are limited.
According to the firm, asset disposals after the effective date of the Act could expose taxpayers to substantial income tax obligations that do not reflect underlying economic realities. To address this, KPMG recommended introducing a cost indexation allowance tied to the Consumer Price Index, using the end of 2025 as a reference point. The adjustment, it said, would improve fairness without increasing capital losses.
The advisory firm warned that unresolved ambiguities in the tax framework could have broader economic consequences. Increased disputes may strain administrative capacity, delay revenue collection, and raise the cost of doing business. More critically, perceptions of an unfriendly tax environment could weaken investor confidence, affect entrepreneurship, and slow job creation, particularly for small and medium-sized enterprises that are more sensitive to regulatory uncertainty.
The warning comes even as the Federal Government has announced revenue concessions under its broader reform agenda. Authorities have said the reduction of corporate income tax from 30 per cent to 25 per cent will result in foregone revenue estimated at about N1.4 trillion in 2026. The government has also clarified that the new capital gains tax regime will not apply retroactively to investment gains made before 2026.
KPMG said addressing the identified gaps quickly would be critical to ensuring the new tax regime achieves its objectives without undermining Nigeria’s investment climate or long-term economic growth.
