Nigeria is ready to agree to include taxes for cryptocurrencies and other digital assets in the Finance Bill 2022 currently being drafted by the Ministry of Finance.
This was announced after an extraordinary virtual meeting of the National Economic Council (NEC) on the proposed Finance Bill 2022, where they also resolved to update the draft with additional input from state governors as the bill progresses to Executive Council. Federal.
The NEC, chaired by the Vice President, is made up of 36 governors and the Governor of the Central Bank. Council meetings are also attended by some members of the Federal Executive Council.
What the FG says: According to Finance Minister Zainab Ahmed, “The bill seeks to modify the relevant taxes, excise duties and statutes of rights in line with the reforms of the Federal Government’s macroeconomic policy and to modify and make more provisions in specific laws in relation to the public financial management of the Federation” .
- He also said that the bill aims to ensure that all sectors of the economy are subject to tax nets, especially sectors that have evolved over the years, such as the cryptocurrency and gaming sectors.
- For example, under the tax equity pillar, all sectors of the economy would fall into the tax net, including capital gains tax on digital assets, cable companies, lottery, and gaming businesses.
Pillars of the bill: According to the Minister, the proposed Finance Bill 2022 is based on five key policy drivers:
- Tax Equity;
- Climate change;
- job creation/economic growth;
- Tax Incentive Reform;
- Income Generation / Tax Administration
Digital tax considerations: The bill contains provisions clarifying the basis for the taxation of cryptocurrencies and other digital assets in line with the government’s policy objective of improving cross-border and international taxation of growing e-commerce with emerging markets.
- Digital tax considerations align with the bill’s tax fairness pillar and include taxing capital gains from digital assets such as lottery, gaming (sports betting), and cable companies.
- The government believes that taxing digital assets brings Nigeria into the league of countries currently doing the same.
- Examples of these countries are the United Kingdom, the United States of America, Australia, India, Kenya, and South Africa.
Climate Change Taxes: The proposed bill also includes a climate change provision that falls under the Climate Change and Green Growth pillar of the bill.
- The plan is to create incentives for the natural gas sector and discourage flaring.
- There are also incentives under the Tax Incentive Reforms pillar, which contemplate new deductions for Research and Development, and Investment Tax Credits; investment subsidy for reconstruction; rural investment subsidy; Income in Convertible Currencies to be exempted, among others.
- In addition, the bill contains an amendment to Taxable Assets which states that “subject to the exceptions provided in this Act, all forms of property shall be assets for the purposes of this Act, whether located in Nigeria or not, including options, debts, digital assets and intangible property in general ”.
What does this mean: Digital assets such as cryptocurrencies are not allowed under the provisions of the Nigerian central bank.
- However, the Nigerian Securities and Exchange Commission recognizes digital assets, such as cryptocurrencies, as a security.
- This essentially gave it legal status, thus open to being taxed appropriately.
- The amendment to the finance bill appears to be part of the government’s push to tax billions of naira in cryptocurrency transactions in Africa’s largest economy.