How to Report NFT Profit in Nigeria: A Complete Tax Guide for 2024

Understanding NFT Taxation in Nigeria

As Non-Fungible Token (NFT) trading surges in Nigeria’s digital economy, understanding tax obligations is crucial. The Federal Inland Revenue Service (FIRS) treats NFT profits as taxable income under Nigeria’s Capital Gains Tax Act. Whether you’re an artist, collector, or trader, failing to report earnings from NFT sales could lead to penalties including back taxes, interest charges, and legal consequences. This guide clarifies Nigeria’s NFT tax framework while helping you stay compliant.

Step-by-Step Guide to Reporting NFT Profits

1. Classify Your Activity: Determine if your NFT dealings qualify as:
   • Investment (occasional sales) – Taxed under Capital Gains Tax (CGT) at 10%
   • Business Income (frequent trading) – Taxed as Personal Income Tax (PIT) at progressive rates up to 24%
2. Calculate Your Taxable Profit:
   • Profit = Selling Price – (Acquisition Cost + Allowable Expenses)
   • Allowable expenses include gas fees, platform commissions, and minting costs
3. Maintain Detailed Records:
   • Transaction dates and wallet addresses
   • Screenshots of purchase/sale confirmations
   • Receipts for related expenses (converted to Naira using CBN rates)
4. File With FIRS:
   • Register for a Tax Identification Number (TIN) if unavailable
   • Submit Capital Gains Tax returns via FIRS’s TaxPro-Max portal
   • Deadline: 30 days after transaction completion for CGT

Calculating NFT Gains: Key Scenarios

Scenario 1: Capital Gain (One-time sale)
Bought NFT: ₦200,000
Sold NFT: ₦800,000
Expenses: ₦50,000 (gas + platform fees)
Taxable Gain: ₦800,000 – (₦200,000 + ₦50,000) = ₦550,000
CGT Due (10%): ₦55,000

Scenario 2: Business Income (Frequent trader)
Annual NFT profits: ₦3,000,000
PIT Calculation:
• First ₦300,000: 7% = ₦21,000
• Next ₦300,000: 11% = ₦33,000
• Next ₦500,000: 15% = ₦75,000
• Remainder ₦1,900,000: 24% = ₦456,000
Total Tax: ₦585,000

Critical Mistakes to Avoid

• Ignoring Small Transactions: FIRS requires reporting all profits, regardless of amount
• Poor Record-Keeping: Without transaction proofs, you risk disallowed deductions during audits
• Currency Conversion Errors: Always use Central Bank of Nigeria (CBN) exchange rates on transaction dates
• Missing Deadlines: Late filings incur 10% penalty + 15% annual interest on unpaid taxes

Frequently Asked Questions (FAQ)

Q: Are NFT profits always taxable in Nigeria?
A: Yes. FIRS considers NFT sales as taxable events, whether you’re a creator or investor.

Q: How does FIRS track NFT transactions?
A: Through blockchain analysis tools and bank account monitoring. Exchanges may share data under international agreements.

Q: Can I deduct NFT losses?
A: Capital losses can offset gains in the same tax year but can’t create refunds. Business losses may be carried forward.

Q: Do I pay tax if I trade NFTs for crypto, not cash?
A: Yes. Barter transactions are taxed based on fair market value at exchange time.

Q: What if I sold NFTs on international platforms?
A: Nigerian residents must declare global income. Convert foreign earnings to Naira using CBN rates.

Q: When should I consult a tax professional?
A: If you have over ₦25 million in annual turnover, complex DeFi transactions, or uncertainty about tax classification.

Staying Compliant in Nigeria’s Evolving NFT Space

With FIRS increasing scrutiny on digital assets, proactive tax compliance protects you from penalties while supporting Nigeria’s formal economy. Document every transaction, file accurately via TaxPro-Max, and consider professional advice for high-volume trading. As regulations evolve (like the 2023 Finance Act amendments), staying informed ensures your NFT ventures remain profitable and lawful.