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- 1 Nigeria joins the league of jurisdictions taxing gains from digital assets.
- 2 The government obligates 10% taxation on capital gains from the disposal of digital assets.
- 3 The new Act aspires to ramp up revenue generation, recognize cryptocurrencies as digital assets, and improve monetary clarity.
As a top ranking country in the world for cryptocurrency usage and ownership, Nigeria has once again come under the spotlight of the crypto world. As per the recent news, on May 28, 2023, Muhammadu Buhari, former President of Nigeria, signed the Finance Bill, 2023 into law as Finance Act, 2023.
A series of tax reforms that aim at modernizing the fiscal framework of Nigeria have been included in the Act. Amongst all, the most groundbreaking amendment the Act has introduced is the inclusion of digital assets as ‘chargeable assets’ and a taxation of gains on the disposal of digital assets (including cryptocurrencies, non-fungible tokens (NFTs), and other tokenized assets) at the rate of 10%.
It has also been stipulated in the Finance Act that the deduction of capital losses on capital gains tax purposes, may be carried forward for a maximum of 5 years.
Taiwo Oyedele, a Fiscal Policy Partner and Africa Tax Leader at PricewaterCoopers (PwC) also shared the highlights of the Act on his Twitter handle on June 6, Thursday.
Nigeria’s Finance Act 2023
— Taiwo Oyedele (@taiwoyedele) June 5, 2023
More parting tax changes by the last administration have emerged. The former President, Mohammadu Buhari signed the Finance Bill 2023 into law on 28 May 2023, the eve of his last day in office with an effective day of 1 May 2023. Below are the top… pic.twitter.com/cBYjSCNGXs
This decision of tax imposition highlights the awareness of the Nigerian government regarding the rapid growth and economic significance of the crypto assets. It further represents the commitment of the authorities to mold the nation’s fiscal framework as per the rapidly advancing technology and constantly evolving financial world.
Additionally, the Finance Act also has some significant implications on the growing economy of Nigeria. Taxing the substantial gains acquired from the disposal of crypto assets broadens the country’s tax base and allows the government to foster economic gains from an untapped source of revenue.
This additional revenue can be used for the development of infrastructure, social programs, and other important sectors, which will ultimately enhance the economic growth of the country. Furthermore, by incorporating cryptocurrencies in the tax infrastructure, the government has inevitably acknowledged their legitimacy and potential for economic development.
Before the announcement of Financial Act 2023, lack of regulations regarding the taxation of digital assets in Nigeria had given rise to ambiguity. However, the official introduction of the taxation process will create a secure and transparent environment for individuals and businesses engaging in crypto transactions.
Response of Experts to the Tax Imposition on Crypto Assets
With the introduction of the Finance Act, 2023, the Nigerian government aims to ensure that the digital asset holders also contribute their fair share to the nation’s development. The news of crypto taxing in Nigeria has received mixed reactions from the experts.
Barnette Akomolafe, CEO of the crypto exchange app M7pay, shared his positive outlook on the Act in a recent news interview. The local blockchain expert welcomed the change by saying that the taxation will be a step toward the acknowledgement and recognition of the cryptocurrencies as legitimate assets. The legislation will further facilitate the integration of digital assets into the nation’s existing financial and regulatory framework.
In contrast, an anonymous local crypto expert said that the taxing of crypto and digital assets would be challenging owing to their unique attributes, e.g., valuation, tracking of transactions, and international complexities. They further added that the government must provide clear guidelines, proper education, and support to the taxpayers for necessary compliance.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while pursuing his post-graduation major in blockchain development. He is a keen observer of details and shares his passion for writing, along with coding. His backend knowledge about blockchain helps him give a unique perspective to his writing skills, and a reliable craft at explaining the concepts such as blockchain programming, languages and token minting. He also frequently shares technical details and performance indicators of ICOs and IDOs.
