Nigeria is set to agree to include taxes for cryptocurrencies and other digital assets in the Finance Bill 2022 currently being drafted by the finance ministry.
This was announced after an extraordinary virtual meeting of the National Economic Council (NEC) on the proposed Finance Bill 2022 where they also decided to update the draft with additional inputs from the State Governors as the bill goes of the Federal Executive Council.
The NEC, headed by the Vice President, consists of 36 governors and the Central Bank Governor. The meetings of the Council are also attended by some members of the Federal Executive Council.
What FG said: According to the finance minister, Zainab Ahmed, “The bill seeks to amend the relevant tax, excise and duty laws in line with the Federal Government’s macroeconomic policy reforms and to amend and make additional provisions in specific laws relating to public financial management of the Federation.”
- He also said that the bill is aimed at ensuring that all sectors of the economy are subject to tax nets, especially sectors that have developed over the years such as cryptocurrecy and gaming sectors.
- For example, under the Tax Equity pillar, all sectors of the economy will be brought into the tax net including Capital Gains Tax from digital assets, Cable Undertakings, Lottery, and Gaming Business.
Pillars of the bill: According to the Minister, the proposed Finance Bill 2022 is anchored on five fundamental policy drivers:
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- Tax Equity;
- Climate Change;
- Job Creation / Economic Development;
- Reform of Tax Incentives;
- Revenue Generation / Tax Administration
Digital Tax considerations: The bill contains provisions that clarify the basis of taxation of Cryptocurrency and other Digital Assets in line with the Government’s policy to promote cross-border and international taxation of growing e-commerce in emerging markets. .
- The digital tax considerations are consistent with the tax equity pillar of the bill and include the taxation of capital gains from digital assets such as lottery, gaming (sports betting), and Cable Undertaking.
- The government believes that the taxation of digital assets has brought Nigeria into the league of countries that are currently doing the same.
- Examples of these countries are the United Kingdom, United States of America, Australia, India, Kenya, and South Africa.
Climate Change Taxes: The proposed bill also includes a provision for climate change classified under Similarly, under the Climate Change and Green Growth pillar of the bill,
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- The plan is to create incentives for the natural gas sector and discourage gas flaring.
- There are also incentives under the pillar of Tax Incentives’ Reforms, which provide new deductions for Research and Development, and Investment Tax Credits; Reconstruction Investment Allowance; Rural Investment Allowance; Earnings in Convertible Currencies to be exempt, etc.
- Also, the bill contains an amendment under Chargeable Assets stating that “subject to any exceptions provided in this Act, all forms of property shall be property for the purposes of this Act, whether situated in Nigeria or not, including Options, debt, digital assets and incorporeal property in general.”
What this means: Digital assets such as cryptocurrencies are not permitted under the provisions of the central bank of Nigeria.
- However, Nigeria’s Security and Exchange Commission recognizes digital assets such as cryptocurrency as a security.
- This essentially gives it legal status, thus allowing it to be taxed appropriately.
- The amendment to the finance bill is seen as part of the government’s push to tax billions of naira in cryptocurrency transactions in Africa’s largest economy.