Reps approve N10m penalty for virtual assets providers

The house of representatives has approved a N10 million penalty recommendation for non-compliance by virtual assets service providers (VASPs) under the Nigeria tax administration bill.

According to the Central Bank of Nigeria (CBN), VASPs include entities that conduct exchanges between virtual assets, such as cryptocurrencies, and fiat currencies, as well as transfers of virtual assets.

The CBN issued operational guidelines in December 2023, permitting financial institutions to provide banking services to VASPs.

In a report presented during plenary on Thursday, the green chamber said VASPs that fail to comply with the tax bill’s provisions will subsequently pay N1 million monthly after the first administrative penalty is paid.

“Any person who fails to comply with the provisions of this Bill shall in addition to having its license suspended or revoked by the Securities and Exchange Commission, pay an administrative penalty to the relevant tax authority, of ₦10,000,000.00 in the first month of default and ₦1,000,000.00 for every subsequent month that the default continues,” the report reads.

The house also recommended that tax exemptions granted by the president must be published in the official gazette, including the grounds for exemption.

“The President may, subject to the approval of the National Assembly, by order exempt from income tax,” the report said.

“Any company or class of companies; or any profits of any company or class of companies from any source, on any ground which appears to be sufficient, provided that the order is published in the official Gazette stating the grounds or the class of companies upon which the exemption is granted to the company or the class of companies.

“The President may, by order amend, add to or repeal any exemption.”

The lawmakers also reduced the tax returns deadline for closed companies in the proposed amendments under the tax administration bill from six months to three months.

For newly incorporated companies, the representatives approved the bill’s proposal that tax returns be filed within 18 months from the date of incorporation or not later than six months after the end of the first accounting period, “whichever is earlier”.

For companies that have been in business for more than 18 months, the house approved the filing of tax returns no later than six months after the end of their accounting year.

THE APPROVED REVENUE-SHARING FORMULA

The lawmakers also approved the tax revenue sharing formula as 10 percent for the federal government, 55 percent for states, and 35 percent for local governments.

For the value-added tax (VAT) revenue-sharing formula for states and local governments, the House adopted the bill’s proposal of 50 percent equality, 20 percent population, and 30 percent consumption.

In the joint revenue board bill, the house recommended that both the tax appeal tribunal and the “office of the tax ombud be funded through the consolidated revenue fund”.

“Tax Appeal Tribunal shall be funded through the Consolidated Revenue Fund, as may be appropriated by the National Assembly, towards the execution of its functions under this Act,” the representatives said.

“The Office of the Tax Ombud shall be funded through the Consolidated Revenue Fund, as may be appropriated by the National Assembly, towards the execution of its functions under this Act.”

According to the representatives, the funding model establishes an independent financial structure, ensuring the office of the tax ombud maintains financial stability and operates autonomously.

President Bola Tinubu had asked the national assembly to consider and pass four tax reform bills in October 2024.

The proposed legislations are the Nigeria tax bill, Tax administration bill, and joint revenue board establishment bill.

The house of representatives considered and adopted the committee on finance’s report on the tax reform bills during plenary on Thursday.