The PricewaterHouseCoopers (PwC) has listed penalties applicable to defaulters in the virtual assets tax implementation being run by the Nigeria Revenue Service (NRS).
In a report released yesterday titled: “Taxing the intangible: A critical analysis of the NRS guidelines on taxation of virtual assets”, the tax audit firm said non-compliance attracts a penalty of N10 million for the first month and N1 million for each subsequent month of default.
It added that failure to deduct tax at source attracts a penalty of 40 per cent of the amount not deducted. Also, failure to remit tax deducted at source attracts 10 per cent per
annum plus Central Bank of Nigeria (CBN) monetary policy rate (MPR) interest in addition to the principal amount.
On applicable taxes and rates, it said a single virtual asset transaction may give rise to multiple tax liabilities based on triggers called “taxable events”.
Also, income tax is applied to individuals (at progressive rates) and companies (at 30 per cent) for companies other than small companies) on gains from disposal and on income or gifts received in virtual assets (including employment income, professional fees, mining rewards, staking rewards, DeFi rewards, airdrops), and all other income from VA activities.
It said the most technically significant provision is the dollar-referenced methodology for computing taxable gains on disposal. It explained that under ther dollar-referenced gain for income tax Computation approach, the gain is computed by reference to the dollar value of the asset at acquisition and at disposal.
Also, only the resulting dollar gain is then converted to Naira at the CBN/NAFEM rate on the disposal date.
“The methodology excludes the Naira depreciation component from the taxable base, ensuring that taxpayers are not taxed on phantom gains arising purely from currency movements,” it said.
