Last updated on July 26th, 2023 at 12:17 am
Let’s get straight into it: gains on cryptocurrency are taxable in Nigeria following the signing into law of the 2023 Finance Bill on May 28, 2023, by former President Muhammadu Buhari. Although, the law became effective on May 1, 2023.
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How much is taxable on crypto gains in Nigeria?
Traders of digital assets are compelled by the 2023 Finance Act to pay 10% of their profits as tax to Nigeria’s government.
Specifically, Section 3 (a) of the 2023 Finance Act which focuses on the Capital Gains Tax Act (“CGTA”) was amended in a move to reform the various tax laws in Nigeria.
In an earlier tax law, no mention of cryptocurrency, but the amended section now has the phrase “digital assets”. Here is what Section 3 (a) says:
Implications of crypto taxation in Nigeria on Businesses
Now that tax on crypto gains is now a law in Nigeria, the ban placed on cryptocurrencies by the Central Bank of Nigeria (CBN) on February 5, 2021, has been invalidated.
Here are some of the implications of digital assets taxation to individuals and businesses that are involved in digital assets in Nigeria:
Operators of crypto exchange platforms in Nigeria are mandated by the law to report every digital assets transaction and disposal made by them in the particular year of assessment.
It is good news for crypto exchanges that operate in Nigeria, considering the thousands of youthful sectors that are interested in buying and selling of cryptocurrencies.
Capital gains tax at a flat rate of 10% shall apply to all gains made following disposal held by any individual or entity to whom the Personal Income Tax Act (“PITA”) in any year of assessment.
Disposal in this case means sale, assignment, transfer, and compulsory acquisition among others.
Challenges ahead of the government:
When the CBN imposed restrictions on crypto trading in February 2021, thousands of Nigerians including the former Minister of State for Budget and National Planning Clem Ikanade Agba and the former Vice President Yemi Osinbajo on February 26, 2021, advocated a regulatory framework instead of an outright ban.
But the restrictions forced the Crypto community in Nigeria to change their trading model and tactics outside the purview of the CBN’s anti-crypto law.
If crypto traders succeeded in escaping the anti-crypto order in 2021 till date, it may be challenging for tax authorities in enforcing the new crypto taxation law.
Thousands of Nigeria now trade anonymously unlike when they funded their crypto wallet through their bank accounts.
How crypto became taxable assets in Nigeria
Back on February 5, 2021, Nigeria through its apex bank ordered deposit money banks (DMBs), non-bank financial institutions (NBFIs), and other financial institutions (OFIs) to close accounts of persons or entities involved in cryptocurrency transactions within their systems.
Some of the reasons given by the apex bank include: It could be used to finance terrorism; political office holders could use it to siphon and keep illicit funds; it could be used for illegal activities
Although Nigeria had the support of the International Monetary Fund (IMF), Nigeria’s Upper Legislative Chamber which showed interest in crypto invited officials of the Security and Exchange Commission (SEC) and CBN.
The lawmakers invited CBN and SEC on February 11, 2021, to discuss opportunities and threats of crypto on Nigeria’s economy and security.
And by February 22, 2021, Nigeria’s SEC agreed that there was a need to regulate cryptocurrencies in Nigeria.
Five months, two weeks, and three days after CBN’s anti-crypto trading order, the apex bank shocked Nigerians on July 22, 2021 that it would launch its digital coin called “ eNaira” globally known as central bank digital currency (CBDC).
Nigeria’s CBDC is different from cryptocurrencies, but the crypto community perceived it as an act of insincerity on the part of the government and as a move to force them to embrace its eNaira project.
And by October 25, 2021, Nigeria unveiled CBDC, thereby becoming the first African country to launch a digital currency.
Unsatisfied by its order, the CBN on April 7, 2022, fined six banks N1.3 billion over disobedience to its order.
But in dramatic news on May 15, 2022, SEC revealed that it recognizes digital assets in Nigeria as securities and subsequently issued regulations on the exchange and custody of cryptocurrencies in Nigeria.
Since then, a lot has been going on behind closed doors to tap into opportunities in cryptocurrencies. And came an opportunity to reform tax law.
So, it wasn’t surprising when the former Minister of Finance, Budget, and National Planning Zainab Ahmed, revealed on December 2, 2022, that there was a provision to tax cryptocurrency and other digital assets in the finance bill.
A few hours before the expiration of his second-term administration, Buhari on May 28, 2023, signed a finance bill, making it a law for individuals to pay tax on the profit they made on cryptocurrency trading.
Is Nigeria the only African country taxing crypto?
Is crypto taxed in Nigeria?
Yes, there is a 10 per cent taxation of gains on cryptocurrencies in Nigeria.
Is cryptocurrency legal in Nigeria in 2023?
Yes, digital asset trading in Nigeria is legal in 2023, individuals and companies can now trade digital assets in Nigeria according to 2023 Finance Act which became effective from May 1, 2023
Is there a crypto policy in Nigeria?
Yes, there is a cryptocurrency policy in Nigeria going by the crypto guidelines of Nigeria’s Security and Exchange Commission.
Crypto taxation in Nigeria is backed by Section 3 (a) of the 2023 Finance Act, 10% of the profit on digital assets goes into the purse of the Federation Account.