The digital economy, powered by internet, mobile devices, and digital tools, encompasses economic activities supported by digital technologies. With constant advancements, this economy combines human expertise with technological capabilities, offering limitless, data-driven, and mobile-centric experiences.
In Nigeria, recent attention to the taxing framework has emerged through Finance Acts, introducing changes to outdated legislative provisions. As technology permeates the economy, even sectors like electoral processes incorporate digital tools. This article examines the taxation of unique digital assets—Cryptocurrencies and Non-Fungible Tokens (NFTs) in Nigeria. It delves into the current and potential implications for holding these assets and anticipates changes in the tax legislation affecting digital asset creators, buyers, and sellers.
Digital Assets Defined: Digital assets, following the International Accounting Standards Board (IASB) framework, are digital resources controlled by an entity, providing measurable economic benefits. These encompass various forms like videos, images, data, and more, stored digitally and offering value.
Cryptocurrencies and NFTs: Cryptocurrency (Crypto), a digital currency recorded on a blockchain, serves as a digital asset. Bitcoin, a popular Crypto, operates independently of central authorities and can be volatile.
Non-Fungible Tokens (NFTs) represent unique digital files tokenized on the blockchain. Each NFT possesses distinct identifiers, history, and value. Factors like rarity and utility influence NFT value, often associated with art, trading cards, or blockchain game items.
Taxation of Digital Assets in Nigeria: As of now, Nigeria lacks specific laws for taxing digital assets. The Finance Bill, 2022, awaiting presidential assent, proposes amendments indicating Nigeria’s move towards taxing digital assets. The bill suggests that digital assets, including Cryptocurrencies and NFTs, will be considered chargeable assets under the Capital Gains Tax (CGT) Act. If enacted, every individual or company making gains on digital asset disposal, regardless of residence, will be subject to a flat 10% CGT rate. The bill also places reporting obligations on buyers and sellers of cryptocurrencies, potentially applying retrospectively from January 1, 2022.
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