KuCoin, a prominent cryptocurrency exchange, has announced that it will start collecting a 7.5 percent Value-Added Tax (VAT) on transaction fees for its users in Nigeria.
This decision comes in response to a recent regulatory update in the country.
In a statement released on July 3, KuCoin said the VAT deduction would take effect from July 8, 2024.
The company clarified that the 7.5 percent VAT would be applied specifically to the transaction fee, not the total transaction amount.
“We are writing to inform you of an important regulatory update that impacts our users from Nigeria,” the company stated.
“Starting from July 8th, 2024, we will begin collecting a Value-Added Tax (“VAT”) at a rate of 7.5% on transaction fees in each trade for users whose KYC information is registered in Nigeria.”
KuCoin explained that for a trade involving $1,000 worth of bitcoin with a 0.1 percent fee rate, the transaction fee would be $1.
The VAT would then be 7.5 percent of that fee, amounting to $0.075, making the net amount for the transaction $998.925.
The platform emphasized, “Please note that the VAT will be applied to the transaction fees in each trade, not the transaction amount, and covers all transaction types on KuCoin platform.”
This move aligns with earlier government indications towards taxing digital assets. In 2022, Zainab Ahmed, the former minister of finance, budget, and national planning, hinted at plans to tax cryptocurrencies and other digital assets.
The 2023 Finance Act imposed a 10 percent tax on profits from digital assets, including cryptocurrencies, though this provision was not enforced.
In May, the Securities and Exchange Commission (SEC) of Nigeria announced plans to delist the naira from all peer-to-peer (P2P) platforms to prevent manipulation in the cryptocurrency space.
KuCoin’s implementation of VAT on transaction fees marks a significant step in the regulatory landscape for cryptocurrencies in Nigeria, as both local and international stakeholders adapt to evolving tax and regulatory requirements.