Crypto traders in Nigeria have kicked against plans by crypto exchange, KuCoin, to start charging Nigerian users of the platform 7.5% Value Added Tax (VAT) on transaction fees starting from July 8, 2024.
Kucoin announced the plan to start charging VAT on Wednesday in an email to its Nigerian users, with the Federal Inland Revenue Service (FIRS)’s requirement.
However, this has not gone down well with many Nigerian users who felt that the government has not reckoned with crypto and should not tax it.
The VAT charge by KuCoin comes amid the Nigerian government’s clampdown on crypto exchanges and crypto-related transactions, which saw the exit of Binance.
The action of the government had also forced Binance and KuCoin to stop NGN/USD P2P trading on their platforms.
What KuCoin said
In the message to the users, the crypto exchange said the decision to start charging VAT was reached in line with regulatory requirements”
“We are writing to inform you of an important regulatory update that impacts our users from the Republic of Nigeria. Starting from July 8th, 2024, we will begin collecting a Value-Added Tax (VAT) at a rate of 7.5% on transaction fees in each trade for users whose KYC information is registered in Nigeria.
“Please note that the VAT will be applied to the transaction fees in each trade, not the transaction amount, and covers all transaction types on KuCoin platform,” the exchange stated.
Nigerians react
Reacting to the announcement, some Nigerian crypto traders threatened to boycott KuCoin and look for alternative platforms that would not charge VAT. This is even as they advised the government to take the bold step of regulating the crypto industry if it wants to tax it.
Expressing his displeasure with KuCoin over the announcement, an X user identified as @MikaelCBernard, wrote:
“Dear Nigerians, boycott KuCoin until they remove that stupid VAT. If the government wants to tax crypto, then they should legalize it. You cannot be blocking people’s bank accounts, using NSA to kidnap crypto traders, and demanding tax. It just does not make sense. Boycott KuCoin wow.”
Dear Nigerians, boycott Kucoin until they remove that stupid VAT.
If the govt wants to tax crypto, then they should legalize it.
You can not be blocking people’s bank accounts, using NSA to kidnap crypto traders, and demanding tax.
Just does not make sense.
Boycott Kucoin Now
— Brother Bernard (@MikaelCBernard) July 3, 2024
Another X user, @iknowWassup wrote:
“What is it that the Nigerian government truly wants? You are collecting tax from something you have refused to legalize.”
What is it that the Nigerian government truly wants? You are collecting tax from something you have refused to legalize.
— Princedede ♔ (@iknowWassup) July 4, 2024
For @Kickflowdown, his concern is that the government would be able to trace crypto traders through the KuCoin platform once it starts collecting VAT on behalf of the government.
“Kucoin will be obligated to share the information of Nigerian users, government will use that information to block Naija accounts. Any Nigerian living in Nigeria still holding a KuCoin account is risking jail and bank account closure. They can easily track p2p transactions,” he wrote.
Kucoin will be obligated to share the information of Nigerian users, govt will use that information to block Naija accounts. Any Nigerian living in Nigeria still holding a Kucoin account is risking jail + bank account closure. They can easily track p2p transactions
— 🌲Mr. Cheers 💎🧢 IDAN of Our Time (@Kickflowdown) July 4, 2024
Another X user, @Crypto4bailout said:
“Now that the Nigeria Govt is ready to collect 7.5% $0.075 from every trade on kuCoin. Is it now legal to withdraw money directly to Opay with the Crypto tag. Because how will I pay tax when I can’t use the tag freely when transacting locally?”
Now that the Nigeria Govt is ready to collect 7.5% $0.075 from every trade on kucoin.
Is it now legal to withdraw money directly to opay with the Crypto tag.
Because how will I pay tax when I can't use the tag freely when transacting locally.
— 🥞C4B Freedom🥞 (@Crypto4bailout) July 3, 2024
For @eminiAlafe, while the VAT is minimal because it will be charged on transaction fees, the issue is the government collecting VAT on crypto, which it has banned across financial institutions.
“It’s just very absurd that a tax is being introduced when they had already pronounced crypto as illegal. Tax here and there yet no positive impact,” he said.
Actually the VAT is very minimal and it's being charged from the already deducted fee by the exchange. It's just very absurd that a tax is being introduced when they had already pronounced crypto as illegal. Tax here and there yet no positive impact!!!
— Olaniyi Sheriff Abiola (@eminiAlafe) July 4, 2024
What you should know
Nigeria’s National Security Adviser (NSA) recently classified crypto trading as a national security issue.
- This led to the Central Bank of Nigeria (CBN) ordering five fintech companies including OPay, Palmpay, Moniepoint, Kuda, and Paga to stop onboarding new customers.
- In response to the regulatory action, all the fintechs have announced the prohibition of transactions on cryptocurrency or any virtual currency on their platforms.
- Under the watch of the CBN, the fintechs are now required to report any account discovered to be trading crypto to the NSA through their regulator, the CBN.
