Kreston Pedabo Warns of New Tax Act's Impact on Financing

The Nigeria Tax Act 2025, signed on June 26, 2025, and effective from January 1, 2026, imposes stricter regulations on intra-group financing for Nigerian companies. Tax advisory firm Kreston Pedabo warns that businesses must now meet a higher standard for structuring and justifying financing arrangements with related entities.

The Act expands the scope of financing arrangements subject to scrutiny, including shareholder loans, parent-subsidiary financing, affiliate lending, and guarantees. A significant change is the expansion of interest deductibility limitations, which now applies to both foreign and domestic transactions involving connected parties, while banking and insurance companies are exempt.

The definition of debt has also been broadened to include loans, financial instruments, finance leases, and derivatives. Companies must adhere to stronger transfer pricing requirements, demonstrating that financing terms align with those that independent parties would agree upon.

Failure to comply may result in penalties, necessitating thorough documentation and annual disclosures of related-party financing transactions.