Why the Nigerian government wants to charge VAT on crypto transactions

• The Nigerian government is set to charge a 7.5% value-added tax on crypto assets effective July 8, 2024
• KuCoin, one of the biggest crypto platforms, disclosed in an email to its customers that a 7.5% VAT will apply to transactions
• The cryptocurrency firm disclosed that it will charge users whose KYCs are registered in Nigeria in line with the government’s directives

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

The Nigerian government is set to harness the $56.7 billion crypto market by implementing a 7.5% value-added tax (VAT) on crypto transactions.

Effective July 8, 2024, the crypto platform KuCoin will begin charging the 7.5% VAT on transaction fees.

FG set to charge VAT on crypto transactions beginning July 8, 2024 Credit: CFOTO / Contributor
Source: Getty Images

SEC mulls plans to tax assets

The move aligns with the aim of the Federal Inland Revenue Service (FIRS) requirement to avoid potential conflict.

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Nigeria has one of the largest peer-to-peer (P2P) crypto markets globally. Chainalysis, a blockchain platform, says that crypto transactions in the country reached about $56.7 billion between July 2022 and June 2023.

Reports say that Emomotimi Agama, the director-general of the Securities and Exchange Commission (SEC), recently stressed the importance of crypto trading and transactions in Nigeria.

Agama said that reports show that Nigeria’s crypto transaction volume hit $56.7 billion between July 2022 and June 2023, representing a nine percent yearly growth.

KuCoin notifies customers of the plan

The crypto platform KuCoin disclosed in an email to customers on Wednesday, June 3, 2024, that its Nigerian users would be charged 7.5% VAT on transactions carried out for users whose KYC information is registered there.

KuCoin said:

“We are writing to inform you of an important regulatory update that impacts our users from the Republic of Nigeria. Starting from July 8, 2024, we will begin collecting a Value-Added Tax (VAT) at a rate of 7.5 percent on transaction fees in each trade for users whose KYC information is registered in Nigeria.”

It noted that VAT will apply to transaction fees only, not to transaction amounts or overall transaction types on the platform.

In the 2022 Finance Act, the Nigerian government imposed a 10% tax on profits from digital assets, including cryptos.

FG blocks access to Binance

The development comes after the Nigerian government blocked access to Binance, the world’s largest cryptocurrency platform.

The country blamed the naira’s crash on the platform, stressing that a considerable amount of foreign currency passed through Binance yearly, undermining the naira’s value.

The governor of the Central Bank of Nigeria (CBN) said in February this year that about $26 billion passed through Binance in one year from unknown sources and users.

The development led to the Nigerian authorities' arrest of two Binance executives.

Opinions are divided on the move to tax crypto assets in the country, with some saying that the government has no basis for the policy after chasing Binance away from the country.

Mix reaction trails Nigeria’s move

“There is some sort of hypocrisy in the policy seeing that it clamped down on the world’s largest crypto platform and arrested its official”, Ifedayo Adedoyin, a crypto trader, told Legit.ng in a phone interview.

Adedoyin said that the naira crash did not drive crypto transactions in the country but the desire of Nigerians to invest in residual income.

“Nobody would put his life savings on cryptos. It is absurd to say that the naira crashed because of crypto platforms. The government needs to rethink its policies and stop blaming traders.”

Another crypto trader, Sam Abu, disclosed that the move is good since the government seeks to raise revenue and bring more people into the tax net. 

“It’s a good move by the government but they need to be proactive about it to forestall exploitation,” Abu said.

Bitcoin exceeds the $60,000 mark for the first time since 2022

Legit.ng previously reported that Bitcoin's price surged above $60,000 late Wednesday, February 28, 2024, marking its highest point in two years.

Data from CoinMarketCap.com indicates that Bitcoin experienced a 7.66% increase, reaching $61,280 at the time of this report, up from $56,917.

This rise comes after a turbulent period in April 2022 when the digital currency plummeted to as low as $19,297 from its previous peak of $68,990 in November 2021.

Source: Legit.ng