Nigeria intends to introduce a 7.5 percent value-added tax (VAT) on cryptocurrency transactions to capitalize on the country’s $56.7 billion cryptocurrency sector.
The cryptocurrency network KuCoin will start collecting the 7.5 percent VAT on transaction fees on July 8, 2024. With Binance’s issue remaining very much in the public eye, the goal is to comply with Federal Inland Revenue Service (FIRS) requirements and prevent any potential disagreement with the tax agency.
Nigeria is home to one of the world’s biggest peer-to-peer (P2P) cryptocurrency markets. Global blockchain platform Chainalysis reports that during July 2022 and June 2023, the amount of cryptocurrency transactions in the nation was $56.7 billion.
The Securities and Exchange Commission’s (SEC) director-general, Emomotimi Agama, has brought attention that a sizeable segment of the populace engages in cryptocurrency trading and transactions.
He stated: “Reports indicate that Nigeria’s crypto transaction volume reached $56.7 billion between July 2022 and June 2023, representing a nine percent year-over-year growth.”
KuCoin emailed clients on Wednesday, saying, “We are writing to inform you of an important regulatory update that impacts our users from the Republic of Nigeria. Starting July 8th, 2024, we will begin collecting a Value-Added Tax (VAT) of 7.5% on transaction costs in each trade for users whose KYC information is recorded in Nigeria.”
The platform stated that VAT applies to all transaction types on the KuCoin platform and will be applied to transaction fees rather than the transaction value. The transaction was shown as “Transaction: Buy 1,000 USDT worth of BTC.” Fee: One USDT (fee rate of 0.1 percent). Tax: 7.5% of the fee, or 0.075 USDT. 998.925 USDT is the transaction’s net amount.
The Finance Act of 2022, which levied a 10% tax on revenues from digital assets, including cryptocurrencies, was Nigeria’s original plan to tax cryptocurrencies.
“All forms of property, whether situated in Nigeria or not, including options, debts, digital assets, and incorporeal property generally, shall be assets for this Act, subject to any exceptions provided by this Act.”
Nevertheless, the Act’s provision was never put into effect.
Despite a Central Bank of Nigeria (CBN) regulation from December 2023 intended to regulate the digital asset industry, Nigeria clamped down on cryptocurrency transactions in 2024. The nation’s crackdown, which used Binance as a scapegoat, included requests for telecom companies to limit platform access and for operators to remove naira transactions from their listings. The nation held these platforms accountable for facilitating illegal flows and promoting the naira to dollar exchange rate manipulation.
The governor of the CBN, Olayemi Cardoso, disclosed in February that $26 billion came through Binance Nigeria in a single year from users and sources that are yet to be identified.
“Suffice to say that we are determined to do everything it takes to ensure that we take charge of our market and not allow others to manipulate it… We will not tolerate it and will take all appropriate measures to stop any violations,” he said.
This ultimately resulted in the delisting of the naira from all Peer-to-Peer cryptocurrency platforms, including KuCoin, the arrest of Tigran Gambaryan, Binance’s head of investigations, and Nadeem Anjarwalla, a British lawyer and Kenya-based manager for the crypto exchange for Africa (who later escaped). Additionally, CBN temporarily banned the opening of accounts for certain fintech companies.
