Nigeria imposes 7.5% VAT on crypto transactions

Cryptocurrency traders in Nigeria will be subject to a 7.5% value-added tax (VAT), starting from July 8, 2024.

A cryptocurrency platform KuCoin announced via email that it will begin collecting VAT on transaction fees for Nigerian users from this date. The company stated that a regulatory update in Nigeria led to their decision to introduce the VAT.

“We are writing to inform you of an important regulatory update affecting our users in Nigeria. Starting from July 8, 2024, we will implement the collection of a 7.5 percent VAT on transaction fees for users whose KYC information is registered in Nigeria,” the email reads.

The company said the VAT will be applied to the transaction fees for every trade, rather than the total transaction amount.

“Note: The 7.5% is only charged on the 0.1%/0.05% transaction fee and not your total amount which will be remitted,” the company added.

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Providing further details, KuCoin explained that if a user purchases $1,000 worth of bitcoin with a 0.1% fee rate, the transaction fee would amount to $1. The VAT would be 7.5% of the transaction fee, which equates to $0.075, resulting in a net transaction amount of $998.925.

The company added that the VAT applies to all transaction types on the KuCoin platform.

The development follows a 2022 statement by Zainab Ahmed, the former Minister of Finance, Budget, and National Planning, who initially said that the government planned to tax cryptocurrencies and other digital assets.

Subsequently, the 2023 Finance Act introduced a 10% tax on profits from digital assets, including cryptocurrencies. However, this provision of the act was not enforced.

In May, the Securities and Exchange Commission (SEC) announced plans to delist the naira from all peer-to-peer (P2P) platforms, citing the need to mitigate the level of “manipulation” occurring within the cryptocurrency market.

Last year, the Tinubu administration briefly unbanned cryptocurrency transactions previously prohibited under the Buhari administration. The new government again limited such businesses being carried out through the banks, accusing cryptocurrency exchanges such as Binance of currency manipulation.