Cryptocurrency platform KuCoin imposes a Value Added Tax of 7.5% on transaction fees for users residing in Nigeria.
In a move to comply with Nigeria's tax regulations, the global cryptocurrency exchange, KuCoin, has announced the introduction of a 7.5% Value Added Tax (VAT) on transaction fees for its Nigerian users, effective from July 8th, 2024. This decision aligns with the Nigerian government's broader strategy to modernize fiscal policies and capture revenue from the growing crypto market.
The grounds for this VAT implementation stem from the Finance Act of 2023, which mandates taxation on cryptocurrency operations, including a 7.5% VAT on transaction fees in addition to a 10% capital gains tax on digital asset profits. KuCoin's application of this charge reflects adherence to these legal requirements and the regulatory landscape changes that encourage cryptocurrency tax compliance in Nigeria.
The VAT will apply to all trade types on the KuCoin platform and will be calculated based on the fee, not the total transaction value. For instance, a 0.1% fee rate on a transaction of 1,000 USDT worth of BTC will result in a VAT of 0.075 USDT. It's unclear, however, the grounds on which KuCoin is imposing this VAT charge, whether it's part of its proactive measure to be regulatory compliant or a response to direct regulatory pressure.
The ongoing legal action against Binance in Nigeria, which has seen one of its executives held in custody since the first quarter of 2024, provides a stark contrast to KuCoin's approach. One of the charges brought against Binance in this case is tax evasion. The exchange did not respond to Mariblock's question regarding its process for remitting the value-added tax.
KuCoin suspended P2P trading and fast buy services via naira card for Nigerian users in May 2024 in response to regulatory concerns. However, the email to customers did not provide any information on whether this VAT policy will be extended to users in other countries or regions, or how the VAT revenue will be used or if it will be remitted to the Nigerian government.
The VAT will only affect users whose KYC information is registered in Nigeria, as stated in a July 3 email to customers. It's unknown how KuCoin intends to remit the collected VAT to Nigerian authorities, given the current restrictions on Nigerian banks working with crypto exchanges.
The Nigerian government began cracking down on peer-to-peer trading of cryptocurrency earlier this year. The Binance case, founded by Changpeng 'CZ' Zhao, has been the poster child of this crackdown. In February, Nigerian authorities detained two Binance executives, alleging that the company failed to pay taxes on transactions conducted through its platform.
This move by KuCoin comes amidst increasing regulatory scrutiny of cryptocurrency operations in Nigeria. The Nigerian authorities launched an investigation into Binance, alleging economic sabotage. As the crypto market continues to grow, it remains to be seen how these regulatory changes will shape the future of cryptocurrency trading in Nigeria.
- Despite the ongoing legal issues Binance faces in Nigeria, KuCoin has announced the introduction of a 7.5% Value Added Tax (VAT) on transaction fees for Nigerian users, intending to comply with the country's tax regulations.
- In line with the Finance Act of 2023, KuCoin will apply the VAT to all trade types on its platform, generating revenue for the Nigerian government, although it remains unclear how exactly KuCoin plans to remit the collected VAT.
- The VAT's imposition by KuCoin suggests a proactive effort to be regulatory compliant in Nigeria, as opposed to a reaction to direct regulatory pressure – a marked contrast to the situation Binance currently finds itself in.
- As the Nigerian government intensifies its crackdown on cryptocurrency operations, with Binance and its executives facing charges such as tax evasion, it remains to be seen how these regulatory changes will impact the wider digital asset market in Africa.
