By Chinelo Obogo
The Federal Government has imposed a 7.5 percent Value Added Tax(VAT) on cryptocurrency transactions.
This was made known after KuCoin, a cryptocurrency exchange, says it will commence collection of the transaction fees for users in Nigeria.
In a statement on July 3, the cryptocurrency platform said the deduction of the VAT would commence from July 8 and that for every trade, the 7.5 percent VAT will be applied to the transaction fee — not the total transaction amount.
According to KuCoin, if a user buys $1,000 worth of bitcoin with a 0.1 percent fee rate, the transaction fee would be $1. The VAT would be 7.5 percent of the fee which is $0.075 — the net amount for the transaction would be $998.925.
“We are writing to inform you of an important regulatory update that impacts our users from Nigeria. Starting from July 8th, 2024, we will begin collecting a Value-Added Tax (“VAT”) at a rate of 7.5% on transaction fees in each trade for users whose KYC information is registered in Nigeria.
“The 7.5% is only charged on the 0.1%/0.05% transaction fee and not your total amount which will be remitted.
“Please note that the VAT will be applied to the transaction fees in each trade, not the transaction amount, and covers all transaction types on KuCoin platform,” the crypto exchange said.
A former minister of finance, budget, and national planning, Zainab Ahmed, had in 2022, hinted at the government’s plans to tax cryptocurrencies and other digital assets and in the 2023 Finance Act, the government imposed a 10 percent tax on profits from digital assets, including cryptocurrencies, though the particular provision of the act was not enforced.
In May, the Securities and Exchange Commission (SEC) announced plans to delist naira from all peer-to-peer (P2P) platforms. SEC said the decision was taken to avoid the level of “manipulation” happening in the cryptocurrency space.
