From the Digifinex blog.
Finance Act, 2023 and Cryptocurrency
On the eve of his departure from office on May 28, former Nigerian President Muhammadu Buhari signed the Finance Act, 2023, into law. The Act, among other tax reforms, introduces a 10% tax on gains from the disposal of digital assets, including cryptocurrencies.
（Image via Bitcoin.com）
Goals of the Legislation
This comprehensive legislation aims to modernize Nigeria’s fiscal framework, enhance fiscal transparency, and boost revenue generation. Furthermore, it seeks to acknowledge the increasing importance of digital assets in the economy by imposing a tax on cryptocurrency transactions.
Nigeria’s Approach to Digital Assets
By implementing this tax, the Nigerian government hopes to ensure that digital asset holders contribute their fair share of taxes to the country’s development. This approach signifies Nigeria’s acknowledgment of the growing influence and economic potential of digital assets while ensuring the tax system keeps pace with the changing financial landscape.
（Image via The Guardian）
Industry Reactions to the Legislation
To understand how the local crypto industry is reacting to this new law, Cointelegraph interviewed members of the Nigerian crypto ecosystem. Barnette Akomolafe, CEO of crypto payments app M7pay, views the new taxes as a step toward recognizing cryptocurrencies as legitimate assets and integrating them into the existing financial and regulatory framework. This move comes after the Central Bank of Nigeria prohibited commercial banks from servicing crypto exchanges in February 2021.
Challenges and Concerns
However, an anonymous local crypto expert pointed out potential challenges in taxing cryptocurrencies due to their unique characteristics, such as valuation, transaction tracking, and international complexities. This expert emphasized the need for governments to establish clear guidelines and provide sufficient education and support to taxpayers. This sentiment was echoed by other crypto enthusiasts.
The Role of Crypto Exchanges
In many jurisdictions, governments rely on cooperation from crypto exchanges operating within their boundaries to monitor users’ capital gains. By collaborating with exchanges, authorities can access transaction data and identify individuals or entities for tax purposes. However, the degree of cooperation and specific regulations vary from country to country, with some jurisdictions implementing stricter reporting requirements for exchanges, while others have limited regulations or are still developing them.
Keywords: Nigeria, crypto tax, Muhammadu Buhari, fiscal transparency, revenue generation, Barnette Akomolafe, M7pay, Central Bank of Nigeria, crypto exchanges, regulation
This article came directly from the Digifinex blog, found on https://blog.digifinex.com/2023/06/16/nigeria-introduces-10-tax-on-cryptocurrency-capital-gains-expert-reactions/