From Nigeria: Cryptocurrency and Taxes: Bridging the Digital Gap
In recent times, cryptocurrency has garnered much global attention. While it offers massive wealth creation opportunities, it also provides taxpayers with a platform for new tax planning opportunities. Since its introduction in 2009, it has become widely used across various jurisdictions.
Although there is currently no international consensus on the treatment of cryptocurrency transactions for tax purposes, various governments such as those of the United Kingdom and South Africa currently impose taxes on cryptocurrency transactions. For example, both countries impose Capital Gains Tax on the disposal of cryptocurrencies as they are treated as chargeable assets for capital gains purposes.
In Nigeria, the government’s approach towards the treatment and taxation of cryptocurrency has been rather conservative. In January 2017, the Central Bank of Nigeria (CBN) and the Securities Exchange Commission issued two separate circulars advising Nigerians, banks and other financial institutions to desist from the trade and use of cryptocurrencies as they are not recognized as legal tender in Nigeria.
The CBN also issued a circular dated February 28, 2018 warning Nigerians on the inherent risks in engaging in cryptocurrency transactions on the basis that cryptocurrencies are not regulated all over the world. Despite these circulars, the Nigerian crypto industry reportedly generated $115 million in trading volume in 2017. The implication of the government’s approach is that potential revenue from taxation of cryptocurrencies may be lost because these transactions are not tracked by the government.
This newsletter highlights the prevalence of cryptocurrency transactions, the tax treatments of crypto-related transactions across different jurisdictions as well as the intrinsic revenue prospects for Nigerian tax authorities.
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