Businesses and individuals involved in virtual-asset activities like cryptocurrency, non- fungible tokens and utility tokens may face penalties running into millions of naira for non-compliance, following a set of tax rules set by the Niger Revenue Service, NRS, PwC Nigeria has said.
According to the professional services firm, taxpayers who default on specified obligations could face a ₦10 million penalty for the first month of default and ₦1 million for every subsequent month.
In a report, the firm highlights the compliance implications of the NRS guidelines as Nigeria seeks to bring income and gains from virtual assets more clearly within the tax system.
PwC said a single virtual-asset transaction could trigger different tax liabilities depending on the event giving rise to the liability.
For individuals, income tax applies at progressive rates, while companies other than small companies are generally subject to a 30 percent income tax rate on taxable gains and income.
The firm said taxable income from virtual-asset activities could include employment income, professional fees, mining rewards, staking rewards, decentralised finance (DeFi) rewards, airdrops and other income derived from virtual-asset activities.
One of the key provisions identified by PwC is the dollar-referenced approach for calculating taxable gains on the disposal of virtual assets.
Under the methodology, the gain is first calculated using the dollar value of the asset when acquired and when disposed of. The resulting dollar gain is then converted into naira using the CBN/NAFEM rate applicable on the disposal date.
PwC described the approach as pragmatic because it prevents taxpayers from being assessed on gains created solely by the depreciation of the naira.
However, the firm noted that the methodology could also work against taxpayers where currency movements reduce the naira value of an otherwise genuine dollar-denominated gain.
PwC said failure to deduct tax at source attracts a penalty equivalent to 40 percent of the amount that should have been deducted.
Where tax has been deducted but not remitted, the taxpayer faces a 10 percent per annum charge plus interest based on the Central Bank of Nigeria’s Monetary Policy Rate, in addition to the principal tax liability.
The firm advised individuals and businesses involved in virtual-asset activities to register for tax and obtain a Tax Identification Number (Tax ID).
It also warned Virtual Assets Service Providers (VASPs) to review their systems because the guidelines could require them to withhold, calculate and remit taxes in token units.
PwC said the absence of a clearly stated effective date could create uncertainty over when VASPs are expected to begin implementing the rules.
The firm also advised taxpayers to adopt a consistent cost-basis methodology from the outset, using either First-In, First-Out (FIFO) or Weighted Average Cost.
It said that taxpayers cannot switch between the two methods retrospectively and must maintain records for at least 6 years.
PwC said that although implementation challenges remain, the guidelines provide a baseline for virtual-asset tax compliance in Nigeria.
