Fed Govt imposes 10% tax on sale of digital assets
Individuals and businesses will now pay 10% of the profit made from selling their digital assets as tax to the federal government.
This is contained in the Finance Act 2023 former President Muhammadu Buhari signed on the 28th of May, 2023. Apart from signing the Finance Act into law on the eve of his departure from office, Buhari backdated the commencement date of the Act to May 1 of the same year.
According to the Act, “taxation of gains on the disposal of digital assets including cryptocurrency at the rate of 10%.
Examples of digital assets include: Social media accounts, Subscription services, Email accounts, Online banking accounts, Credit card accounts, Utility accounts.
Others are: Contact lists, Shopping accounts, Photo and video sharing and storage accounts, Smartphone, computer, tablet or cloud data, Existing digital collections, Websites or blogs you maintain, Online marketplace stores, Domain names, Cryptocurrency keys and Text, graphic and audio files (or other intellectual property).
However, while online financial accounts and platforms are considered digital assets, the funds in the accounts/platforms are not.
Also in the Finance Act 2023, all services including telecommunication services are now liable to excise tax at rates to be prescribed by the President.
Before leaving office, Buhari increased the Tertiary Education Tax rate from 2.5 percent to 3 percent of every registered companies assessable profits.
Tertiary Education Tax is imposed on every Nigerian company at the rate approved by the President of the assessable profit for each year of assessment.
The funds are disbursed for the general improvement of education in federal and state tertiary educations specifically for the provision or maintenance of: Essential Physical Infrastructure for teaching and learning; instructional material and equipment; research and publications.
The government also reintroduced the payment of taxes for purchasing life insurance policy for an individual or a couple.
According to the Act, “tax deduction is restored for premium paid in respect of insurance on own life and spouse”.
Other changes made to the old Finance Act include: deduction of capital losses on assets for capital gains tax purposes. This may be carried forward for a maximum of 5 years.
Shareholders who want to sell their shares can rollover the gains made from the sale by reinvesting “the proceeds within the same year of assessment. Government has equally approved the deletion of investment allowance on plant and equipment.
A 0.5 percent levy has been imposed on goods imported into Nigeria from outside Africa under the 2023 Finance Act.
Buhari in his last minute assent to the 2023 Finance Act retained the contentious sharing formula of Electronic Money Transfer (EMT) levy at 15 percent to the federal government, 50 percent to state governments and 35 percent to local governments. EMT is a singular and one-off levy of N50 on the recipient of any electronic receipts or transfers of N10,000 or above.
Last year, state governments had opposed the EMT sharing formula demanding instead that the proceeds of the levy be allocated as 15 percent to the federal government and the federal capital territory and the remaining 85 percent of the levy derived from that state as the law provides to be retained by them.
In the 2023 Finance Act, application of transfer pricing rules to Value Added Tax (VAT) on transactions between connected persons will now be considered to be artificial or fictitious. In addition, companies appointed to withhold VAT at source are now to remit such VAT to the Federal Inland Revenue Service (FIRS) on or before the 14th day of the following month as against 21st day of the following month.
Henceforth, VAT on goods purchased via electronic or digital platforms from a non-resident supplier appointed as an agent of the FIRS will be “chargeable to VAT and paid by the importer unless the proof of appointment and registration with FIRS is provided”.
The Finance Act has redefined building for VAT purposes “to exclude any structure not permanently affixed to land for all or most of its useful life”. The Act also approved the establishment of a Governing Council, Executive Board, and a Management Team for the Ministry of Finance Incorporated.
