KuCoin, a leading global cryptocurrency exchange, announced the introduction of a 7.5% Value-Added Tax (VAT) on transaction fees for its users in Nigeria. This new policy, effective from July 8, 2024, will impact all trades conducted by users whose Know Your Customer (KYC) information is registered in Nigeria.
The VAT will be levied on the transaction fees incurred during trades, rather than on the transaction amounts themselves.
In an email to customers on Wednesday, KuCoin said, “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 percent on transaction fees in each trade for users whose KYC information is registered in Nigeria.”
This move aligns KuCoin with Nigerian regulatory requirements, aiming to enhance compliance and streamline financial operations within the country.
In 2022, Nigeria indicated plans to tax crypto in the Finance Act which was revised to include a 10% tax on profits from digital assets, including cryptocurrencies.
Detailed Breakdown of the VAT Application
To better understand how this new tax will be implemented, let’s consider a sample transaction:
Example Calculation:
Transaction: Buy 1,000 USDT worth of BTC
Fee: 1 USDT (0.1% fee rate)
Tax: 0.075 USDT (7.5% of the fee)
Net Amount for Transaction: 998.925 USDT
In this example, when a user buys 1,000 USDT worth of Bitcoin (BTC), a transaction fee of 1 USDT is charged, following KuCoin’s 0.1% fee rate. The new VAT policy imposes a tax of 7.5% on this fee, resulting in an additional cost of 0.075 USDT. Consequently, the net amount available for the transaction after the fee and tax deduction would be 998.925 USDT.
This change is part of KuCoin’s commitment to regulatory compliance and fostering a transparent trading environment. By integrating VAT into its fee structure, KuCoin not only adheres to local laws but also enhances its reputation as a responsible and law-abiding entity in the global cryptocurrency market.
KuCoin, the exchange that announced the VAT change, is one of the crypto exchanges being closely watched by the Nigerian government.
In May, KuCoin had to shut down its peer-to-peer platform due to regulatory pressure. The Nigerian authorities have also been in a long legal fight with Binance, the largest crypto exchange in the world, which resulted in the detention of two of Binance’s executives.
Nigeria is home to one of the largest peer-to-peer (P2P) cryptocurrency markets worldwide. According to Chainalysis, a leading global blockchain platform, crypto transactions in the country amounted to $56.7 billion between July 2022 and June 2023.
KuCoin’s decision to implement VAT on transaction fees is expected to have a notable impact on its Nigerian user base, which has been growing steadily due to the increasing popularity of cryptocurrencies in the region.
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