0.5% Cybersecurity Tax in Nigeria: List of 14 Items Exempted

Estimated reading time: 5 minutes

The Central Bank of Nigeria (CBN) has mandated that all banks levy a cybersecurity tax of 0.5% on every transaction. The proceeds will fund cybersecurity initiatives and infrastructure to safeguard electronic transactions against potential threats.

As per the CBN circular issued, the levy will come into force two weeks following the announcement on May 6, 2024. The Office of the National Security Adviser (ONSA) will oversee its administration, as outlined in the announcement.

What is Cybersecurity Tax?

The cybersecurity tax is a levy imposed by government authorities on electronic transactions to finance efforts and infrastructure aimed at safeguarding digital systems and data from cyber threats.

0.5% Cybersecurity Tax in Nigeria

The funds generated from this tax are typically allocated towards initiatives such as improving cybersecurity protocols, implementing protective measures, and enhancing the resilience of electronic networks against potential cyber-attacks.

The circular states

Following the enactment of the Cybercrime (Prohibition, Prevention, etc.) (Amendment) Act 2024 and under the provision of Section 44 (2)(a) of the Act, a levy of 0.5 percent (0.005) equivalent to a half percent of all electronic transactions valued by the business specified in the Second Schedule of the Act, is to be remitted to the National Cybersecurity Fund, which shall be administered by the Office of the National Security Adviser,”

The levy will be applied when the electronic transfer originates, and then deducted and remitted by the financial institution. The deducted amount will be shown in the customer’s account with the description, “Cybersecurity Levy.”

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This public notice was issued by the directors of the Payment System Management and Financial Policy and Regulation Departments at the Apex Bank, Chibuzor Efobi, and Haruna Mustafa.

While the tax applies to most electronic transactions, the CBN has specified certain exemptions to alleviate the burden on citizens and businesses. The following transactions are exempt from the new tax regime.

  • Loan Disbursements and Repayments: Individuals and businesses taking out loans or making repayments are not subject to the 0.5% tax.
  • Salary Payments: Salary deposits remain untouched by the cybersecurity tax, ensuring employees receive full pay without additional deductions.
  • Intrabank Transfers: Transfers between accounts within the same bank, whether for the same customer or between different customers, are exempt from the tax.
  • Other Financial Institutions (OFIs) Transactions: OFIs making payments to their correspondent banks are not subject to the tax.
  • Interbank Placements and Transfers: Banks making transfers to the CBN or vice versa and branch-to-branch transfers within a bank are exempt.
  • Cheque Clearing and Settlements: The cybersecurity levy does not apply to cheque clearing and settlements.
  • Letters of Credit (LCs): Transactions involving LCs are also exempt from the tax.
  • Bank Recapitalization: Transfers related to bank recapitalization, such as bulk funds movement from collection accounts are exempt.
  • Savings and Deposits: Long-term investments such as Treasury Bills, Bonds, and Commercial Papers, are exempt.
  • Government Social Welfare Programmes: Transactions related to social welfare programs, such as pension payments, are exempt.
  • Non-Profit and Charitable Transactions: Donations to registered non-profit organizations or charities are exempt.
  • Educational Institutions: Transactions that involve payment to schools, universities, and other related institutions are exempt.
  • Bank’s Internal Accounts: Transfers involving internal bank accounts, including suspense, clearing, and escrow accounts, are exempt.
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Impact of the 0.5% Cybersecurity Tax on Citizens

The implementation of the 0.5% cybersecurity tax carries significant implications for citizens. Last year, Galaxy Backbone Limited, Nigeria’s Information Technology and Shared Services provider, reported thwarting over 1.2 million attempted cyber attacks during the 2023 Presidential and National Assembly elections on February 25th.

Muhammad Abubakar, the managing director, disclosed that the agency expended approximately $4 billion to secure the country’s electoral portal on election day. Now, it appears that the government has opted to transfer the cost of securing cyberspace onto its citizens.

While the cybersecurity levy is intended to enhance the safety and security of electronic transactions, it could also impose additional financial burdens on citizens and businesses. Consumers may encounter increased costs on specific transactions, leading them to modify their banking behaviors.

The introduction of the new cybersecurity levy compounds the existing financial strains on Nigerians, especially in light of recent economic difficulties such as the removal of fuel subsidies and the fluctuation of the naira. Many citizens are concerned that the new levy will exacerbate their financial hardships and impact their capacity to engage in business activities.

Understanding 0.5% Cybersecurity Tax Burdens

Amidst discussions of the cybersecurity levy, there are also indications that the government plans to reintroduce the telecom tax, initially proposed in 2022 but met with resistance leading to its suspension. Initially set at 5 percent, it faced opposition until President Bola Tinubu ordered its suspension in July 2023.

Given the multitude of challenges confronting the Nigerian economy, the government and its agencies must find a balance between enhancing cybersecurity and mitigating the imposition of excessive taxes.

FAQs

What is the 0.5% Cybersecurity Tax?

The 0.5% Cybersecurity Tax is a levy imposed by the Nigerian government to fund initiatives aimed at improving cybersecurity in the country.

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Who is subject to the 0.5% Cybersecurity Tax?

There may be variations depending on the specific legislation, but the tax might apply to:

  • Businesses operating in Nigeria
  • Individuals earning above a certain income threshold (if applicable)

How are the funds collected from the Cybersecurity Tax used?

The funds could be directed towards:

  • Strengthening cybersecurity infrastructure
  • Developing and implementing cybersecurity measures
  • Enhancing cybercrime prevention and investigation capabilities
  • Public awareness campaigns on cybersecurity

What are the benefits of the 0.5% Cybersecurity Tax?

  • Improved national cybersecurity posture
  • Increased protection against cyber threats for businesses and individuals
  • Reduced risk of cyberattacks and data breaches

Are there any exemptions from the 0.5% Cybersecurity Tax?

Potentially, there might be exemptions for specific sectors or organizations deemed non-profit or low-risk. It’s advisable to consult the official tax guidelines for details.

How can I learn more about the 0.5% Cybersecurity Tax?

Consult the official website of the Nigerian tax authority.
Seek guidance from a tax professional.
Stay tuned for news updates from government channels.

Disclaimer: This information is intended for general informational purposes only and should not be construed as professional tax advice.

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