Starting next week, Nigerian crypto enthusiasts will face a new hurdle as KuCoin, one of the country's popular crypto exchanges, begins collecting a 7.5% Value-Added Tax (VAT) on transaction fees. This move, announced via email to users, is set to take effect on Monday, July 8, and will apply to all users whose Know Your Customer (KYC) information is registered in Nigeria. The decision follows Nigeria's 2022 Finance Act, which proposed taxing digital assets, including cryptocurrencies. While the specifics of tax remittance remain unclear, this development marks a significant step in Nigeria's evolving approach to crypto regulation.

KuCoin's New Tax Policy: What You Need to Know

KuCoin has announced that it will begin to collect a 7.5% Value-Added Tax (VAT) on transaction fees from its users in Nigeria. According to an email sent to its users on Wednesday, the new tax regime will be effected starting next week on Monday (July 8). The 7.5% VAT will be deducted from the transaction fees of crypto transactions of users whose KYC information is registered in Nigeria.

In 2022, Nigeria indicated plans to tax crypto in the Finance Act which was revised to include a 10% tax on profits from digital assets, including cryptocurrencies, although not much had been heard about it since then until now.

“Subject to any exceptions provided by this Act, all forms of property shall be assets for this Act, whether situated in Nigeria or not, including options, debts, digital assets, and incorporeal property generally.” The act says.

Mixed Signals from Nigerian Authorities

Albeit having a mixed and somewhat contradictory approach to crypto and blockchain, the Nigerian authorities might be taking the first step towards enforcing the tax directive outlined in the Finance Act by imposing the 7.5% VAT on crypto transactions.

KuCoin 7.5% Tax: All You Need to Know

According to the circular to customers, starting next Monday, KuCoin will collect 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 exchange stressed that the VAT will be applied to the transaction fees in each trade, not the transaction amount, and covers all transaction types on the KuCoin platform.

In practical terms, if a trader purchases 1,000 USDT worth of BTC with a transaction fee of 1 USDT the VAT will be 0.075 USDT (7.5% of the fee) and the next amount for the whole transaction will be 998.925 USDT.

However, it is unclear if this directive is emanating from the Federal Inland Revenue Service (FIRS) or regulatory authorities like the Securities and Exchange Commission (SEC). Also, it is unclear how KuCoin plans to remit the taxes to the Nigerian authorities as there is still a ban against the transaction of cryptocurrencies in the country.

Global Context: How Other Countries Tax Crypto

Some of the countries where crypto is taxed via different ways like Capital Gains Tax, Income Tax and Wealth Tax include the United States, United Kingdom, Australia, Canada, Germany, Ireland, Switzerland, France, Spain, Austria, and The Netherlands.

Crypto in Nigeria: A Confused Regulatory Landscape

Nigerian authorities have adopted a somewhat confused and contradictory stance on crypto regulation. Since the beginning of the year, authorities have been clamping down on crypto exchanges and peer-to-peer trading platforms, in what they term a crackdown on naira manipulators.

Related Post: Prolonged Face-off with Binance Will Scare Investors and Founders – Nigerian Blockchain Group

KuCoin, the exchange which made this announcement, is among the crypto exchanges under scrutiny by the Nigerian government. Earlier in May, the platform had to shut down its peer-to-peer platform, bowing to regulatory pressure. The Nigerian authorities have also been in a prolonged legal battle with the largest crypto exchange in the world, Binance, which led to the detainment of two of the exchange’s executives.

Although Richard Teng, Binance CEO had earlier claimed he was working closely with the Nigerian government to resolve the situation, he later announced that the Nigerian authorities were demanding bribes from its detained executives to make the money laundering trial initiated against them go away.

This context makes the new development from KuCoin more confusing. The regulatory authorities will have to explain their stance as an item that is banned cannot be taxed.

The Broader Implications for Crypto in Nigeria

The imposition of a 7.5% VAT on crypto transactions by KuCoin could have broader implications for the crypto market in Nigeria. It could potentially discourage trading activities on the platform, as users might seek alternatives that do not impose such taxes. This move could also set a precedent for other exchanges operating in Nigeria, leading to a more widespread adoption of similar tax policies.

The Future of Crypto Regulation in Nigeria

The Nigerian government's approach to crypto regulation has been inconsistent, with a mix of crackdowns and attempts to integrate digital assets into the financial system. The introduction of the 7.5% VAT on crypto transactions could be seen as a step towards formalizing the crypto market in Nigeria. However, the lack of clarity on how these taxes will be remitted and the ongoing ban on crypto transactions pose significant challenges.

Potential Impact on Crypto Adoption

The imposition of the 7.5% VAT could also impact the adoption of cryptocurrencies in Nigeria. While the country has a large and active crypto community, the additional tax burden could deter new users from entering the market. Existing users might also reduce their trading activities to avoid the extra costs.

The Role of KuCoin in the Nigerian Crypto Market

KuCoin's decision to implement the 7.5% VAT on transaction fees highlights the exchange's commitment to complying with local regulations. However, it also raises questions about the exchange's future in the Nigerian market, especially given the regulatory challenges and the potential impact on user activity.

Conclusion: Navigating the Complex Crypto Landscape in Nigeria

The introduction of the 7.5% VAT on crypto transactions by KuCoin marks a significant development in Nigeria's evolving approach to crypto regulation. While it aligns with the 2022 Finance Act's provisions on taxing digital assets, the lack of clarity on tax remittance and the ongoing ban on crypto transactions add to the complexity of the situation.

As Nigerian authorities continue to navigate the regulatory landscape, it remains to be seen how these developments will impact the crypto market and the broader adoption of digital assets in the country. For now, crypto enthusiasts in Nigeria will need to adapt to the new tax regime and stay informed about further regulatory changes.

Related Articles

• How to Pay Taxes? Cryptocurrency in the USA, UK, UAE, Japan, and Germany: A comprehensive guide on how different countries approach the taxation of cryptocurrencies.
• Nigeria’s Regulatory Stance Raises Questions About Crypto Access: An in-depth look at the Nigerian government's recent actions and their implications for the crypto community.
• Kenyan Government Directs Local Blockchain Association to Draft Bill: Insights into Kenya's efforts to regulate the crypto market and the role of industry associations in shaping legislation.

Final Thoughts

The evolving regulatory landscape for cryptocurrencies in Nigeria presents both