Presidential Fiscal Policy and Tax Reforms Committee Chairman, Mr Taiwo Oyedele, has issued a detailed response to KPMG’s observations regarding Nigeria’s new tax laws, which are set to fully take effect on January 1, 2026. KPMG had highlighted several sections of the laws as confusing, warning of potential investor discouragement if not addressed. Mr Oyedele acknowledged that some of KPMG’s points were useful, particularly concerning implementation risks and clerical errors. However, he stressed that the majority of the consultancy’s publication reflected a misunderstanding of the policy intent and a mischaracterization of deliberate policy choices. Many of the issues KPMG described as “errors,” “gaps,” or “omissions” are, according to Oyedele, either the firm’s own errors or stem from a lack of proper understanding of the broader reform objectives. He noted that KPMG might have missed the context of these deliberate policy choices, or they may simply prefer different outcomes than those embedded in the new legislation. While disagreement with policy direction is legitimate, framing it as errors or gaps is not, he stated. Oyedele suggested that KPMG could have been more effective by engaging directly for clarifications, similar to other professional firms. It is crucial, he emphasized, to distinguish between policy choices made to achieve reform objectives and mere preferences of a firm. A significant clarification was made regarding the taxation of shares and the stock market. Contrary to the presumption that new tax provisions would trigger a sell-off, Oyedele explained that the applicable tax rate on share gains is not a flat 30 percent. The framework is structured from zero to a maximum of 30 percent, which is set to reduce to 25 percent. Furthermore, a substantial majority of investors, 99 percent, are entitled to unconditional exemption, with others qualifying based on reinvestment. The market’s current all-time high performance and increased investment flow demonstrate investors’ understanding that these tax changes will enhance corporate fundamentals. The narrative of a sell-off is unsubstantiated, as any disposals in December 2025 would have benefited from exemptions or enhanced deductions under the new law. What is the tax rate on share gains in Nigeria’s new laws? The tax rate on chargeable gains from shares in Nigeria’s new tax laws is structured from zero percent up to a maximum of 30 percent, with plans for it to reduce to 25 percent. A significant majority of investors are eligible for unconditional exemption, and others can qualify through reinvestment, making the sell-off narrative largely unsubstantiated. Oyedele also addressed the complexity of setting a commencement date. The proposal to align the commencement date with the start of an accounting period, such as January 1, 2026, takes a narrow view. Wholesale reform impacts numerous issues beyond a single accounting period, spanning multiple periods, different bases of assessment, and matters related to audits, deductions, credits, and penalties. Limiting the commencement to a single date would fail to address the intricacies of continuous transactions and other transition matters. Therefore, KPMG’s proposal is not a universal “gold standard.” The new provision to tax indirect transfers of shares is a deliberate policy choice, aligning with global best practices and BEPS initiatives. Its purpose is to close a long-exploited tax loophole, not to hinder competitiveness. This is a common international tax provision, and the assertion that it might affect economic stability is disingenuous. Regarding VAT exemption on insurance premiums, KPMG’s point is technically unnecessary. Insurance premiums are not considered a “taxable supply” under the Nigeria Tax Act, as insurance deals with risk transfer rather than the supply of goods or services subject to VAT. This has always been the administrative and legal position, making a specific exemption amendment academic. The concern about the inclusion of “community” in the definition of a ‘person’ but its omission from the charging section is not a gap or ambiguity. In statutory interpretation, definitions apply wherever the term appears unless context dictates otherwise. Both ‘person’ and ‘taxable person’ in the charging section include ‘community,’ consistent with modern legislative drafting principles that use comprehensive definitions to streamline provisions and avoid redundancy. The composition and mandate of the Joint Revenue Board (JRB) are intentional. Its policy advisory role is to offer a subnational tax and revenue perspective, complementing the Ministry of Finance’s fiscal policy mandate. Its membership is appropriately limited to revenue-focused agencies, reflecting its name. This composition is similar to the former JTB, which operated effectively. KPMG’s analysis appears to conflate the distinction between a foreign-controlled company and a foreign operation of a Nigerian company. Dividends from foreign companies cannot be “franked” as no Nigerian Withholding Tax would have been deducted. Section 162(1)(s) exempts dividends, interest, rent, or royalty from outside Nigeria brought in through approved channels. Treating dividends from Nigerian companies differently from foreign companies is a deliberate policy choice due to their fundamental tax differences. The view that a payment subject to deduction as final tax automatically exempts a non-resident from tax registration misses a critical distinction. While passive income may be conditionally exempt from registration, tax deduction on non-passive income does not equate to exemption from registration or filing returns. Residents are also required to file returns on income like interest or dividends where WHT is final, as returns serve purposes beyond just tax revenue generation. Exempting foreign insurance companies from tax on premiums from Nigerian business, while local companies pay tax, would be detrimental to the domestic insurance sector, creating an unfair competitive disadvantage. The current policy aims to protect and promote local industry. Finally, the disallowance of tax deduction for the difference when a business buys foreign exchange in the parallel market at a premium over the official rate is a critical fiscal policy choice. This complements monetary policy, aiming to strengthen and stabilize the Naira by removing the tax subsidy for parallel market patronage and redirecting FX demands to the official market. This is policy congruence, not an error.
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