Main | What school proprietors should know about tax »

Saturday, 06 January 2018

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Atkinson

Nice one boss, however I'm not sure GTCoin as with other cryptocurrencies will qualify as a legal tender under our existing laws. I think it will be seen more as a commodity that is not an end in itself, consequently its use will result in a barter transaction.

If that's the case, I don't think the user will be liable to tax under the current tax law until it is "sold" for cash

Sanni hamed

They should take the tax from their coins and not my naira. We never asked them for coin.

Ilias

This is very insightful. I also think that it will only be fair to deduct WHT only when the coins are used. While GTCoins and other digital currencies to be organized by other banks (as you foresee) will be 'easy' to administer for the taxman, I see a bigger challenge for him on others not organized by banks; especially that the taxman doesn't appear to be thinking ahead like you just did. Bravo!

Femi

This is an excellent write up and it is forward thinking. However a form of loyalty reward scheme and a market retention strategy by GTB. Will it amount to double taxation? Will GTBank be calculating this as their cost of business or a fraction of their net margin? These are some of the question we may also need to answer.

Temitope

👍🏽

Nojeem 'Nudge' Yusuf

@Atkinson - Thank you for your comments. Your comments are in order. I only need to note that GTCoins cannot be exchanged for cash at the moment. As mentioned in the post, GTCoins become taxable in the hands of the beneficiary only when it has been used to buy something.

Nojeem 'Nudge' Yusuf

@Hamed - Thank you for your comment. Based on my recommendation, nobody's going to touch your Naira. You'll only need more coins to buy the same thing you currently buy with less coins. The Bank will settle the service provider and the taxman without touching your Naira.

Nojeem 'Nudge' Yusuf

@Ilias - Thank you for your comments. I am aware the CBN is working on developing a framework around digital currencies, irrespective of whether the currency is generated by banks or not. I'll spend some time to study it and and see how it helps me come up with ideas for the taxman. It should be possible to learn from other climes, who may have devised means to tax digital currencies efficiently.

Nojeem 'Nudge' Yusuf

@Femi - As proposed, the tax burden is going to be borne by the beneficiaries (i.e. the account holders) and not the bank. GTBank only needs to increase the number of coins you need to make purchases to accommodate the tax.

Babatunde Akin-Moses

Nice article Nudge - insightful as always. I agree that deduction at source may be the most practical way of taxation. Unfortunately, I suspect that the taxman would not pay too much attention because until corporate transactions are involved and amounts are larger. We may have to look into the the tax implications of income derived from other digital currencies.

For instance, a start up named SureRemit - backed by Dozie of Diamond Bank - is about to launch a its own crypto currency through an Initial Coin Offering (ICO). If it succeeds, there might be capital gain questions when the currency eventually appreciates in value.

Nojeem 'Nudge' Yusuf

@'Tunde - Thank you for your comments and the commendation. SureRemit is news to me. I just googled it now, and it appears very interesting.

Yes there may be capital gains tax (CGT) questions around cryptocurrencies - the main argument will be whether capital gains on cryptocurrencies are tax exempt. You know the law exempts currencies other than the Nigerian currency from CGT. Does the legal definition of currency cover cryptocurrency?

Lawal Arishekola


"Capital losses are limited to total capital gains made in the year plus up to $3000 of ordinary income. However, taxation on digital currencies and its reporting is not as simple as it seems. For starters, it is difficult to determine the fair value of the bitcoin on purchase and sale transactions."

"
When you sell stock within a year of buying it, the profit is taxed as ordinary income. But if you hold that stock for longer, it is taxed at the capital gains rate. The same is true for your bitcoins."

" Exchanges or purchases of virtual currencies represent the business risk of investors and investors' money are not protected. ... There is no capital gains tax chargeable on bitcoin, however bitcoin mining is taxed and businesses selling goods/services in bitcoin are also taxed."

As such, Nigerian tax system have a long way to go on charging taxes on digital currencies as the country doesn't recognize it already and several works by CBN on cryptocurrency hasn't seen the daylight since when other countries have been adopting the blockchain technology to solve several plaguing problems.

As it is, all Tax Consultants and Financial advisers need to look and study the cryptocurrency world and decide on a better way of fulfilling the mandatory act of tax payment through it.

Nice article as always, Mr. Nojeem, please keep it coming!

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