Corporate Tax in 2026: 7 Critical Errors and Gaps KPMG Flagged in Nigeria’s New Tax Laws

Nigeria’s tax reform, which officially took effect on January 1, 2026, was designed as a transformative overhaul to simplify the tax landscape and boost national competitiveness. Anchored by the Nigeria Tax Act (NTA) 2025 and the Nigeria Tax Administration Act (NTAA) 2025, the reform replaced over 50 legacy laws with a unified system under the new Nigeria Revenue Service (NRS).

However, the transition has not been without friction. KPMG Nigeria recently released a comprehensive review highlighting significant errors, inconsistencies, and drafting gaps. These issues, if left unaddressed, could lead to costly disputes and undermine the very “simplicity” the government promised.

Below is a breakdown of the 7 key issues identified by KPMG and their legal implications for businesses and individuals in 2026.

1. The “Community” Ambiguity: Who is Actually Taxable?

While the NTA defines a “person” to include communities, Sections 3(b) and 3(c), the actual charging provisions omit the term.

• The Conflict: In Nigerian law, communities often own land and receive economic compensation.
• The Risk: Under statutory interpretation, tax laws must be unambiguous. If a charging section omits a group, they may legally argue they are exempt. KPMG warns that this is a material inconsistency that needs urgent legislative clarity.

2. Foreign vs. Domestic Dividends

Section 6(2) of the NTA introduces potential double taxation for foreign earnings.

• The Issue: Foreign dividends may be subjected to full income tax, unlike domestic dividends which often enjoy more favorable treatment.
• Legal Implication: This creates an uneven playing field for multinationals and may conflict with existing Double Taxation Treaties with countries like the UK and South Africa.

3. Compliance Burdens for Non-Residents

Sections 17(3)(b) and (c) fail to explicitly exempt non-resident companies without a Significant Economic Presence (SEP) from registration.

• The Risk: This imposes unnecessary administrative burdens on foreign entities whose only obligation should be a final withholding tax, potentially discouraging foreign investment.

4. The Forex Reality Gap

Section 20(4) restricts the deduction of foreign currency expenses to the official CBN rate.

• The Reality: Many businesses are forced to access forex at higher parallel market rates due to liquidity issues.
• The Impact: By ignoring actual costs, the law effectively inflates taxable profits, increasing the tax burden on businesses struggling with currency volatility.

5. Punitive VAT-Linked Disallowances

Under Section 21(p), an expense is not deductible if VAT was not charged on it, even if the expense was legitimate.

• The Problem: This shifts the burden of compliance from the supplier to the buyer. If your supplier forgets to charge VAT, your business loses its tax deduction. KPMG argues this is punitive and counterproductive.

6. Capital Loss and Inflation Omissions

Section 27 leaves it unclear whether capital losses (except for digital assets) are deductible.

• The Issue: Furthermore, capital gains are calculated without inflation adjustments (Cost Indexation).
• The Result: In a high-inflation environment like Nigeria, taxpayers may end up paying tax on “gains” that don’t exist in real economic terms.

7. Oppressive Personal Income Tax Reliefs

Section 30 significantly narrows the scope of individual deductions. The most controversial change is the Rent Relief cap, now limited to 20% of annual rent, capped at ₦500,000.

• Professional Opinion: KPMG notes this is potentially “oppressive.” In cities like Lagos, where rents are high, this cap offers very little actual relief for the middle class compared to the old Consolidated Relief Allowance (CRA).

What This Means for Nigeria’s Tax Climate

The identified gaps could weaken investor confidence and increase the cost of doing business. For the reform to succeed, policymakers may need to issue urgent administrative guidance to align these laws with economic realities.

Check Your Numbers

With the removal of the old CRA and the introduction of the ₦500,000 rent cap, your monthly take-home pay has likely changed. Don’t rely on guesswork.

Try it yourself: [Use the 2026 Nigeria Tax Calculator] to see exactly how these new laws and reliefs affect your salary.