Nigeria’s recently signed Finance Act has a introduces a 10% tax on gains from the disposal of digital assets, including cryptocurrencies.
The all-encompassing Finance Act, 2023, signed into law by former President, Muhammadu Buhari, aims to:
- Improve financial transparency
- Increase revenue generation, and
- Stimulate economic growth
hence recognition of the growing significance of digital assets.
Players in the Nigeria industry see the move as an encouraging sign for the industry given that Nigeria has had hostile policies for the industry. This was highlighted by the move by the Central Bank of Nigeria to ban commercial banks from servicing crypto exchanges in February 2021.
One player, Barnette Akomolafe, CEO of the crypto payments app, M7, has noted that the new taxes can be seen as a step toward recognizing cryptocurrencies as legitimate assets and integrating them into the existing financial and regulatory framework.
On the other hand, some opine that the taxation of cryptocurrencies could present challenges due to the distinctive characteristics of digital assets. As such, many who hold this view maintain that governments must establish clear guidelines and provide adequate education and support to taxpayers.
In numerous instances, governments often rely on the collaboration of cryptocurrency exchanges operating within their jurisdiction to monitor users’ capital gains. By partnering with exchanges, authorities can obtain transaction data and identify individuals or entities for tax-related purposes.
Nigeria joins South Africa as the African countries with active taxation jurisdictions for digital assets. This comes after the activation of a licensing regime for cryptocurrency companies began on June 1 2023 in South Africa.
South Africa’s Financial Sector Conduct Authority (FSCA) has given a six-month period for all operators to apply.
Besides the two, Kenya’s Treasury in the process of introducing regulations that seek to introduce digital assets taxation including one that would require cryptocurrency exchanges to pay taxes on commissions they earn from their customers.
For the purposes of these regulations, a taxable electronic, internet or digital marketplace supply include…facilitation of online payment for, exchange or transfer of digital assets excluding services exempted under the Act,” says the Value added Tax (Electronic, Internet and Digital Marketplace Supply) Regulations, 2023 published by Treasury Cabinet Secretary, Njuguna Ndung’u.
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