The introduction of the tax collection on gains from the release of digital assets, including cryptocurrencies, shows that Nigeria is recognizing the growing influence and economic potential of digital assets while ensuring that the tax system keeps pace with the evolving financial landscape. Furthermore, the tax provision would enhance fiscal transparency, boost revenue, and create a level playing field to ensure digital asset holders contribute their share of taxes to the country’s development. However, striking a balance is important to avoid crippling the industry growth and innovation.

CHECK:  Binance Nigeria declared illegal by SEC, warns investors

 

Nigeria to tax crypto, digital assets 10% on capital gains — Experts Skeptical
Nigeria to tax crypto, digital assets 10% on capital gains — Experts Skeptical

Nigeria has introduced a 10% tax on gains from the disposal of digital assets, including cryptocurrencies. The act aims to modernize the country’s fiscal framework and enhance fiscal transparency, boost revenue, and recognize cryptocurrencies as legitimate assets. This provision broadens Nigeria’s tax base, fosters innovation, and addresses regulatory challenges.

CHECK: President Tinubu Suspends Godwin Emefiele As CBN Governor

Implications of the tax reform

This tax law applies to all gains made following a release of digital assets held by any individual or legal entity subject to the Personal Income Tax Act or any year of assessment. The tax is ten percent of the profits from the sale of capital assets. The tax authorities in Nigeria provides guidelines for calculating how the Capital Gains Tax is arrived at and deducted. In addition, the tax provision would create a level playing field to ensure digital asset holders contribute their share of taxes to the country’s development. By doing so, the Nigerian government seeks to ensure that digital asset holders contribute their share of taxes to the country’s development.

 

Expert reactions

The tax law has generated mixed reactions from experts in the crypto industry. Some experts have welcomed the move, saying that it is a step toward recognizing cryptocurrencies as legitimate assets and integrating them into the existing financial and regulatory framework. Others have expressed concerns that the tax could affect negatively the industry growth and innovation.

 

FAQs

Loader image

The Finance Act, 2023, introduces a 10% tax on gains from the disposal of digital assets, including cryptocurrencies.

The Finance Act, 2023, was signed into law by former Nigerian President Muhammadu Buhari on May 28, 2023.

 

 

The Nigerian government seeks to create a level playing field to ensure digital asset holders contribute their share of taxes to the country’s development.

 

The tax applies to gains from the disposal of digital assets, including cryptocurrencies.

Crypto traders in Nigeria will now have to pay a 10% tax on gains from the disposal of digital assets.

 

Crypto is taxed at a flat rate of 10% in Nigeria.

There are no exceptions provided by the Capital Gains Tax Act, but the Finance Act, 2023, may provide some exceptions.

 

 

Taxpayers are required to self-assess themselves to tax and remit the applicable tax(es) on digital asset transactions.

 

The tax provision broadens Nigeria’s tax base, fosters innovation, and addresses regulatory challenges.

 

Striking a balance is important to avoid stifling industry growth, and education and awareness campaigns are necessary for compliance and understanding of digital asset taxation.

 

Capital gains tax (CGT) is a tax charged on the profit obtained from the disposal or exchange of certain kinds of assets. In Nigeria, CGT is charged at a flat rate of 10% of chargeable gains.

 

The capital gain is the difference between the sale proceeds from the sale of the assets. Expenses that are incidental to the deposal are allowed as a deduction from the sales proceeds. A positive difference is a gain while the negative difference is a loss. The tax rate is 10% on capital gains.

 

All chargeable assets are subject to capital gains tax when disposed of at a gain, except those specifically exempted by the Capital Gains Tax Act. Chargeable assets include all forms of property, whether or not situated in Nigeria, including options, debts, and incorporeal property generally.

 

 

Gains exempted from CGT include those arising from disposal of decorations awarded for valour and gallant conduct, life insurance policy, Nigerian government securities, stock, and shares, among others.

 

Anyone who disposes of a chargeable asset at a gain is liable to pay CGT.

 

In Nigeria, CGT is charged at a flat rate of 10% of chargeable gains. Crypto is subject to the same tax treatment as other capital gains and losses.

 

Gains accruing to a person other than a person's resident outside Nigeria from a disposal of shares in any foreign company are not exempt under the Capital Gains Tax Act.

 

Some income that is not taxable in Nigeria includes dividends received from a Nigerian company, interest on a Nigerian government loan, and income earned by a foreign company from a trade or business carried on in Nigeria.

 

Yes, freelancers are required to pay tax on their income in Nigeria.

 

Some categories of people who are exempt from paying tax in Nigeria include employees earning less than the minimum wage, self-employed persons whose annual turnover is less than N25,000, and companies with an annual turnover of less than N25 million.

 

The amount of tax payable in Nigeria depends on the type of tax and the amount of income or gain. In general, CGT is charged at a flat rate of 10% of chargeable gains.

 

RELATED ARTICLESMORE FROM AUTHOR