KuCoin imposes a 7.5% Value-Added Tax (VAT) on transaction fees for users residing in Nigeria.
In a recent development, global cryptocurrency exchange KuCoin has announced the introduction of a 7.5% Value-Added Tax (VAT) on transaction fees for its Nigerian users, effective July 8th, 2024. The move is in compliance with Nigeria's tax regulations that require VAT collection on digital services, including cryptocurrency transactions.
The email, sent to customers on July 3rd, 2024, did not specify whether the VAT will apply to other fees or charges on the KuCoin platform. KuCoin did not respond to Mariblock's question regarding its process for remitting the value-added tax.
This VAT imposition reflects a broader trend where governments, including Nigeria, are increasingly regulating and taxing crypto-related services to formalize the industry and generate public revenue. KuCoin's action likely aligns with Nigeria's VAT framework, under which companies providing services digitally (like crypto exchanges) must collect VAT from users and remit it to the Nigerian government.
While exact technical details of KuCoin's VAT remittance process are not disclosed, typical practices include KuCoin calculating the 7.5% VAT on transaction fees charged to Nigerian users, collecting that tax alongside user fees, and periodically submitting the aggregated VAT proceeds to Nigeria's tax authority via authorized payment channels.
It's unclear the specific grounds on which KuCoin is imposing the VAT charge. However, the ongoing regulatory scrutiny of cryptocurrency operations in Nigeria may have played a role in the decision. KuCoin suspended P2P trading and fast buy services via naira card for Nigerian users in May 2024, in response to regulatory concerns.
The tax will be calculated based on the transaction fee, not the total transaction value. For instance, a fee of 1 USDT for a 1,000 USDT purchase of BTC will incur a VAT of 0.075 USDT. The VAT will apply to all trade types on the KuCoin platform.
The announcement comes amidst increasing regulatory scrutiny of cryptocurrency operations in Nigeria. Binance, founded by Changpeng 'CZ' Zhao, has been a target of the Nigerian government's crackdown, with tax evasion being one of the charges brought against the exchange in the ongoing legal action against Binance in Nigeria. Nigerian authorities have also launched an investigation into Binance, alleging economic sabotage. A Binance executive has been held in custody in Nigeria since the first quarter of 2024.
Users whose KYC information is registered in Nigeria will be affected by the VAT. It's unknown how KuCoin intends to remit the collected VAT to Nigerian authorities, given the current restrictions on Nigerian banks working with crypto exchanges. This remains a significant challenge for the formalization of the cryptocurrency sector in Nigeria.
In summary, KuCoin's imposition of a 7.5% VAT on transaction fees for Nigerian users is a response to Nigeria's tax regulations on digital services. The collected VAT will be remitted to the Nigerian tax authorities, ensuring regulatory compliance and helping the Nigerian government formalize taxation of the crypto sector. This move aligns with global trends of crypto taxation and is consistent with the increasing regulatory scrutiny of cryptocurrency operations in Nigeria.
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