Nigeria Revenue Service (NRS) – renamed following a tax administrative reform, which had previously been known as the Federal Inland Revenue Service (FIRS) – has issued new Guidelines on the Taxation of Virtual Assets
The Guidelines, established in accordance with the Nigeria Tax Act and Nigeria Tax Administration Act, impose a duty on supervised VASP and operators of all centralized exchanges and P2P marketplaces to operate as collecting agents for stamp duties (i.e., electronic transactional duties/levies), VAT, and withholding taxes on the transaction activities of virtual assets. Transaction-Based Stamp Duties and Levies like banks’ EMTL transaction taxes also apply to crypto-registered transaction receipts, contract transfers, and exchange settlements. Mandatory TAX ID / TIN Integration of Registered exchanges and P2P escrow platforms.
All exchanges and P2P/escrow Platforms are required to collect customers’ Tax ID / TIN in the registration process. This digital asset-based platform must automatically extract applicable stamp duties, contract taxes, etc. during trade settlement, and remit within the stipulated payment period as provided by law. What this means for individual traders and investors
Higher Friction & Micro Fees: Almost) every single trade, deposit, & withdrawal to and from a flat in compliant regulated exchanges already has tiny fees attached, with automatic tax stamp deductions in place.
– Pseudonymity in Nigeria is virtually over with regulatory requirements; you cannot simply trade without a Tax ID number on a centralized crypto exchange. The NRS has set some clear limits that trigger taxation. Digital assets or unrealized gains are not taxable until disposal or exchange:
Self-Transfer. No tax imposed for transferring assets between owned digital wallets as if no change of beneficial ownership has occurred. Corporate Profits – gain resulting from activities in virtual assets to be taxed at standard corporate income tax (CIT) rate of 30%, Individual Capital Gains – profit realized through selling, trading or swapping of digital assets is taxable under the progressive Personal income tax, Income gained – Staking rewards, earning from mining, airdrop and verification service would be treated as gross income subject to tax. The NRS has instituted sharp penalties for non-compliant entities and traders to deter evasion:
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To deter evasion, the NRS has instituted sharp penalties for non-compliant entities and traders:
Entity Type
Violation
Initial Penalty
Recurring Monthly Fine
VASPs & P2P Operators
Failure to register, collect, or remit duties/taxes
N10,000,000 (1st Month)
N1,000,000 (per subsequent month)
Individuals / Businesses
Failure to register for tax purposes
N50,000 (1st Month)
N25,000 (per subsequent month)
Instead, users must submit their identity number to the exchanges, along with a daily user log (date, trading volumes, values, and who placed the order) to ensure they maintain their tax compliance status.
Failure to track the correct cost bases on your trades results in traders being tax liable for gross revenue rather than realized net gain. This means you must calculate several items (exchanger charges, network fees, and original purchase price) to calculate your actual net gains for tax purposes. There’s a threat of SEC license suspension or revocation for defaulters.
Extremely High Default Penalties for Exchanges & VASPs: An admin fine of 10 million for the first month of the inability to onboard users with Tax IDs and not remit stamp duty and tax, then another 1 million every subsequent month. The infrastructure of the domestic exchange needs an upgrade to compute/split and remit stamp duty and report directly to the NRS TaxPro portal, automatically. Officialdom of stamp duties and income tax on digital assets may be a tool to formalize crypto into Nigerian legal frameworks and remove the decades-old conflicts between the crypto world and the CBN/financial regulators.
Retail, high-frequency traders, and large market-makers may move some liquidity toward DEXs and P2P platforms not under a custodial system to reduce the aggregate of micro-transaction costs in Nigeria.
