Former Nigerian President Muhammadu Buhari ended his term on May 28 by signing the Finance Act 2023 into law. This landmark piece of legislation aims to modernize Nigeria’s fiscal framework through tax reform. One of the important provisions introduced by this law is the introduction of a 10% tax on profits from the sale of digital assets, including cryptocurrencies.
The comprehensive nature of this law reflects Nigeria’s commitment to fiscal transparency, revenue generation and economic growth. By imposing a tax on cryptocurrencies, the government seeks to build a fair environment where holders of digital assets contribute their share of taxes towards the country’s development. This move highlights Nigeria’s recognition of digital assets’ growing influence and economic potential while ensuring that the tax system is in line with the evolving financial landscape. To gain further insight into the response from the industry and community, Cointelegraph reached out to various stakeholders in the local crypto ecosystem.
Barnette Akomolafe, CEO of M7pay, a crypto payments app, shared with Cointelegraph her thoughts on the new tax law. According to Akomolafe, this tax can be interpreted as a positive step towards recognizing cryptocurrencies as legitimate assets and integrating them into existing financial and regulatory frameworks. It should be noted that the Central Bank of Nigeria previously banned commercial banks from servicing crypto exchanges in February 2021.
An anonymous local crypto expert highlights the challenges associated with cryptocurrency taxes because of their unique characteristics, such as valuation, transaction tracking, and international complexity. They stressed the need for the government to set clear guidelines and provide education and support to taxpayers. This viewpoint resonates with other crypto enthusiasts as well.
In many cases, governments rely on the cooperation of crypto exchanges operating within their jurisdictions to monitor users’ capital gains. By collaborating with these exchanges, authorities can access transaction data and identify individuals or entities for tax purposes. However, the degree of cooperation and specific regulations differ from country to country. Some jurisdictions have implemented strict requirements for exchanges to report user information, while others may still be developing such regulations.
The Finance Act 2023 sets the stage for Nigeria to embrace the potential of digital assets while ensuring they are properly taxed. As the country moves forward, it will be important to balance regulation and innovation, provide clear guidance to stakeholders and promote an enabling environment for the growth of the crypto industry.