Cryptocurrency exchange KuCoin adds 7.5% tax for Nigerian users, citing ‘regulatory update’

Signs of an imminent change in Nigeria’s cryptocurrency regulations emerged on Wednesday when cryptocurrency exchange KuCoin announced it would begin charging VAT on transactions from July 8. The exchange cited a “regulatory update” in an email sent to customers.

““From July 8, 2024, we will start collecting Value Added Tax (“VAT”) at a rate of 7.5% on transaction fees for each transaction for users whose KYC information is registered in Nigeria,” KuCoin said in an email sent to its Nigerian users.

The KuCoin Africa Twitter account shared the same information. The tax applies to “all types of transactions on the KuCoin platform,” the exchange said Decipher.

This is not Nigeria’s first attempt to introduce a tax on cryptocurrency transactions.

The Finance Bill 2023, signed into law by former Nigerian President Muhammadu Buhari, introduced sweeping changes to the country’s revenue. It included a 10% capital gains tax on profits made from the sale of digital assets from May 1, 2023.

The country’s Securities and Exchange Commission (SEC) has clarified that “digital assets” include cryptocurrencies, secured tokens, and non-secure tokens.

Experts said Decipher last year that the lack of clarity on the status of cryptocurrencies in Nigeria could make it difficult to collect capital gains tax. KuCoin’s new VAT fee has been met with similar sentiments.

SEC chief Emomotimi Agama said Decipher that the agency has no comment yet on the new tax. However, taxing crypto transactions could be an early official recognition of the crypto sector in Africa’s most populous country.

The introduction of a VAT on crypto transactions raises questions about the broader implications for Nigeria’s burgeoning crypto industry. Just last week, the SEC estimated the industry there was valued at $400 million.

As one of the largest digital currency markets in Africa, Nigeria’s regulatory decisions will likely impact investor confidence and market dynamics.

Last month, the U.S. Securities and Exchange Commission asked cryptocurrency exchanges and digital asset traders to have 30 days to re-register their businesses — or face enforcement action. The SEC said the move is part of its plan to regulate digital asset trading.

Edited by Stacy Elliott.