6 gaps in the tax laws that affect company income tax

The Nigeria Tax Act (NTA), 2025, came into effect with the promise of simplification, equity, and stronger revenue mobilisation. But as companies begin to review the law more closely, several provisions are raising concerns about how company income tax (CIT) will be calculated in practice.

Some of these gaps could increase tax exposure, while others introduce uncertainty that may complicate business planning and investment decisions.

Based on a review of the law and issues highlighted by KPMG, the following six areas stand out as having direct implications for company income tax:

Taxing asset disposal gains without inflation adjustment

Sections 39 and 40 of the NTA provide that chargeable gains are calculated as the difference between sales proceeds and the tax-written-down value of an asset, with no adjustment for inflation.

In a high-inflation environment, this means companies could be taxed on gains that are largely nominal rather than real. Assets acquired several years ago at much lower naira values may now be sold at higher prices that simply reflect inflation, yet the full difference would be taxed at the 30 percent CIT rate.

This could significantly increase tax liabilities on asset disposals and may even encourage companies to sell assets earlier than planned to manage exposure. Tax professionals have proposed introducing a cost indexation allowance to adjust historical asset costs for inflation when computing gains.

Read also: Nigeria’s company income tax surges 38% in H1 2025 – NBS

Forex expenses are limited to official exchange rates

Section 20(4) of the NTA restricts the deductibility of foreign-currency expenses to their naira equivalent at the official Central Bank of Nigeria exchange rate.

In practice, many companies source foreign exchange at rates higher than the official window due to supply constraints. Under this rule, the difference between the official rate and the actual rate paid becomes non-deductible, increasing taxable profits and CIT payable.

While the provision appears aimed at discouraging speculative FX activity, it does not fully reflect market realities. For import-dependent businesses, it could materially distort taxable income and raise effective tax burdens.

Expenses disallowed where VAT was not charged

Section 21(p) disallows expenses on which value-added tax was not charged, even if those expenses were wholly and exclusively incurred for business purposes.

This shifts the compliance risk of suppliers onto companies. Where a supplier fails to charge VAT, the purchasing company may lose the right to deduct the expense for CIT purposes, despite having no control over the supplier’s actions.

The result is potential double exposure: higher taxable profits for the company and separate VAT liabilities for the supplier during audits. Tax experts argue that deductibility should depend on the nature of the expense, not the VAT compliance status of third parties.

Unclear treatment of capital losses

Section 27 of the NTA, which deals with the computation of total profits, does not clearly state whether capital losses other than those relating to digital or virtual assets are deductible.

This ambiguity affects companies that incur losses from asset disposals, restructurings, or divestments. Without explicit guidance, companies and tax authorities may adopt different interpretations, increasing the risk of disputes and unexpected tax assessments.

Professionals believe the law intends to allow such losses, but the lack of clear wording leaves room for inconsistent application that could affect reported taxable profits and CIT outcomes.

Export profit exemptions are missing

Section 162 of the NTA lists income tax exemptions but appears to exclude profits from non-petroleum exports, an item previously exempt under the Companies Income Tax Act and referenced in earlier gazetted versions of the new law.

The omission raises a critical question for exporters: are profits from non-oil exports now taxable, even where proceeds are repatriated through official channels?

Given Nigeria’s push to grow non-oil exports, the lack of clarity creates uncertainty for exporters and investors alike. Without official clarification, companies face the risk of unexpected tax exposure.

Read also: Tax reforms in 2026: More govt revenue or relief for citizens?

Controlled foreign company rules may raise effective tax

Section 6(2) of the NTA introduces controlled foreign company (CFC) rules that treat undistributed foreign profits as if they were distributed and include them in the profits of the Nigerian company.

This means Nigerian companies with foreign subsidiaries could be taxed at 30 percent on profits that have not been repatriated. Unlike dividends from Nigerian companies, which are treated as franked investment income, dividends from foreign companies do not appear to enjoy the same treatment.

The result is a mismatch in how local and foreign dividends are taxed, increasing the effective tax rate for Nigerian companies with offshore operations and complicating cross-border investment structures.

While the new tax laws mark a major shift in Nigeria’s fiscal system, these gaps highlight the tension between revenue mobilisation and economic competitiveness. Tax professionals say early clarification, whether through amendments or regulatory guidance, will be critical to reduce disputes and give businesses certainty as the new regime beds in.

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