Tax Act 2025 Faces Fresh Scrutiny Over Ambiguities
By FIDELUS ZWANSON
New Tax Act Under Scrutiny as KPMG Flags Gaps, Ambiguities
Background: A Major Fiscal Reset
NIGERIA’S Tax Act 2025, scheduled to take effect on January 1, 2026, is one of the most sweeping fiscal reforms in recent years. Designed to expand the tax base, increase revenue, and modernise collection, the law has, however, come under intense scrutiny following a detailed review by global accounting firm KPMG.
In its assessment, KPMG identified 31 issues ranging from inconsistencies and ambiguities to potential policy gaps, warning that unresolved flaws could create hardship for taxpayers and undermine investor confidence.
Personal Income Tax and Inflation Concerns
One of KPMG’s central concerns is the failure to adjust the ₦800,000 tax-free income threshold for inflation. Introduced in 2011, the figure has not been revised despite significant erosion in purchasing power.
KPMG argues that the absence of inflation indexing effectively increases the tax burden on low-income earners. The firm recommends raising the exemption to at least ₦1.5 million annually and restoring the consolidated relief allowance to protect vulnerable taxpayers.
Capital Gains and Losses: A Grey Area
The firm also raised concerns about ambiguity in the treatment of capital losses. Under Section 27, the Act appears to impose capital gains tax even where an asset is sold at a loss, except for digital or virtual assets.
Traditionally, capital losses are deductible against gains. KPMG warns that failing to clearly state whether such deductions are allowed could lead to disputes, unexpected liabilities, and prolonged litigation.
Communities as Taxable Entities
Another contentious issue arises from conflicting definitions of who qualifies as a taxable “person.” While Section 3 lists individuals, families, companies, trustees, and estates, another provision defines “person” to include communities.
KPMG notes that this contradiction raises questions about whether community development associations, villages, or towns are now liable to federal taxes. The firm insists that if such taxation is intended, it must be explicitly stated; otherwise, the provision should be clarified or removed.
Double Taxation Risks for Foreign Companies
The Act also introduces uncertainty for foreign companies providing services to Nigeria. KPMG highlights contradictions between sections that appear to require foreign firms to both pay withholding tax at source and file annual tax returns, effectively creating double taxation.
Such ambiguity, analysts warn, could discourage foreign investment and increase the cost of doing business in Nigeria.
Government Response and Ongoing Debate
Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, has dismissed KPMG’s conclusions, describing them as misinterpretations rather than genuine ambiguities. He acknowledged the existence of clerical errors but maintained that the law is fundamentally sound.
However, the debate has intensified following reports of discrepancies between the National Assembly’s certified true copy and the gazetted version of the Act—an issue KPMG did not address.
As lawmakers continue to review the legislation, analysts say timely clarification will be critical to avoid economic disruption when the law takes effect.
