The Nigerian Revenue Service (NRS) published tax guidelines that establish a clear and standardized framework for how virtual assets and virtual asset-related transactions are taxed. The guidelines explain the tax obligations arising from virtual asset transactions and provide practical guidance on how to administer them. Additionally, the guidelines specify that transactions relating to virtual assets may be subject to income tax, VAT, or stamp duty.

VAT Rules for Virtual Assets

The NRS clarified that transferring ownership of a virtual asset is not, by itself, subject to VAT in Nigeria. However, VAT applies to taxable goods and services connected with virtual asset transactions. These taxable goods and services include fees charged by Virtual Asset Service Providers (VASPs) for activities such as exchanging, brokering, custody, wallet management, listing, transaction facilitation, advisory services, digital platform services, and other professional or taxable services.

Also, when a virtual asset is used to pay for taxable goods or services, such as cryptocurrencies or stablecoins, the underlying transaction remains subject to VAT just as it would if the customer had paid in fiat currency. In those cases, the supplier is responsible for calculating and remitting the VAT under the applicable Nigerian tax rules. 

Furthermore, foreign VASPs providing taxable digital services to customers in Nigeria must comply with the relevant registration and VAT obligations for non-resident suppliers. If the non-resident supplier does not charge VAT, the Nigerian resident company receiving the service must generally self-account for the VAT. The specific obligations are addressed in Nigeria's Information Circular on the Taxation of Non-Resident Persons and the Guidelines for Income Tax Returns by Foreign Companies.

Finally, the NRS explained that VAT liabilities involving virtual assets must be calculated using the virtual assets' fair market value at the time of the transaction, with the resulting VAT being remitted in the applicable transaction currency.

Conclusion

Nigeria has been strengthening its regulation of the cryptocurrency and virtual asset sector as digital assets become more widely used within the economy. Under the new NRS guidelines, businesses involved in virtual asset activities must meet various tax compliance requirements, including registration, reporting, withholding, VAT, and record-keeping obligations.

Taxable persons, Virtual Asset Service Providers, P2P marketplace operators, tax advisers, financial institutions, and anyone involved in virtual asset activities should review these guidelines to fully understand how virtual assets are taxed in Nigeria.