Experts requests clarity as risk of tax disputes increases

Since the implementation of the new tax law, experts are still seeking clarity, as they warn that the absence of detailed transitional and interpretive guidelines could expose companies to unexpected liabilities, lost tax credits, and weakened incentives.

In the Nigerian Tax Acts, unanswered questions remain about how old and new rules interact. Tax professionals say this has left companies making compliance decisions without clear standards, increasing the risk of disputes during future audits.

“When the new tax law was signed,  gaps were anticipated; the natural outcome is that questions will arise regarding these specific sections,” said Peter Nwofia, partner at Forvis Marvis, during a live discussion with fellow tax consultants titled ‘The New Tax Reforms and the Road Ahead: Where Will the Gavel Fall?’.

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One of the most immediate risks relates to the treatment of accumulated input VAT credits under the old tax regime. While the new law introduces clearer timelines for VAT refunds, including a requirement that applications be made within 12 months of a transaction, many affected transactions occurred long before the reforms were enacted.

As a result, companies with VAT credits built up over several years fear they could lose legitimate claims simply because the transition rules are unclear.

“Without transitional guidance, firms may lose legitimate VAT credits through no fault of theirs,” Nwofia said, noting that the law does not explicitly address how pre-reform credits should be treated as a result of the new timeline in the reform.

Experts warn that failure to clarify this issue could undermine confidence in the reform’s promise of transparency and fairness, particularly for businesses that have complied with reporting obligations under the previous system.

Beyond VAT, uncertainty also surrounds the introduction of a 15 percent minimum effective tax rate aimed at curbing base erosion and profit shifting. While the policy intention is widely understood, advisers say its practical application raises difficult questions.

Key among them is how the effective tax rate should be computed for companies that report accounting losses, especially where those unrealised foreign exchange movements drive those losses.

Practitioners also questioned whether firms that generate no taxable profit in a given year could still be required to pay a top-up tax.

“These provisions appear to target profitable companies, but the law is not explicit,” said Olafaju Oluwatobi, Senior manager, tax. “That creates room for inconsistent interpretation.”

The minimum tax provisions have also triggered debate about their interaction with long-standing tax incentives, particularly in agriculture and other priority sectors that enjoy income tax exemptions for defined periods.

Analysts say turnover-based thresholds embedded in the new law could override those exemptions if not carefully clarified, effectively weakening incentives designed to support investment and production in strategic industries.

The new reform also appears to create a policy tension: while the government seeks to encourage agriculture, it is also focused on enforcing minimum taxation. The law does not yet clarify which objective takes precedence.

Tax professionals say the combined effect of these unresolved issues is that companies are already taking positions on VAT, income tax, and payroll without knowing how regulators will ultimately interpret the law.

While acknowledging the complexity of tax reform, advisers warn that prolonged uncertainty could increase compliance costs, deter investment, and erode trust in the tax system.

“Reforms succeed not just on ambition, but on clarity,” Olamide Sulaiman, a tax consultant, said. “If businesses cannot clearly understand how the rules apply during the transition, the risk of disputes becomes inevitable.”

Tax authorities have indicated that further guidelines will be issued, but practitioners say the timing and scope of those circulars will be critical in determining whether the transition delivers certainty or opens a new cycle of tax controversy.

Ayomide Odunlami is a Tax Reporter at BusinessDay, covering Nigeria’s tax reforms, compliance trends, and government revenue strategies. She reports on how evolving tax policies affect businesses, investors, and the broader economy, providing clarity on complex regulatory issues through data-driven journalism.

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