FIRS wants Binance to pay $79.5bn for ‘economic loss’ and $2 million for tax evasion

The Federal Inland Revenue Service (FIRS) has placed a request to the Federal High Court in Abuja to order the cryptocurrency exchange platform, Binance, to pay $79,514,055,594.40 and N231 million for economic losses allegedly caused by its operations in Nigeria. It also requested a $2,001,000,000 penalty for tax evasion during 2022 and 2023.

These financial requests include a 10 per cent penalty for non-payment of income tax for 2022 and 2023 and a 26.75 per cent interest rate from January 1, 2023, and January 1, 2024. 

The platform was also accused of violating Nigerian laws by failing to register with the FIRS for tax compliance and causing economic losses to the country during the period under review.

The lawsuit stated that following Binance’s alleged infractions, the Central Bank of Nigeria (CBN) tasked its Research Department in May 2024 to assess the financial penalty for Binance’s activities. The result showed that Binance’s activities resulted in estimated economic losses amounting to $79,514,055,559.44 over six months (early 2024).

In the words of Jimada Mohammed Yusuf, a member of the Special Investigation Team from the Office of the National Security Adviser, who investigated Binance’s business activities alongside officials from the FIRS, he said:

“From the infractions committed in Nigeria by the defendants, for engaging in foreign exchange or any other trading instrument, Binance, and its executives are liable to the Federal Government for the sum of $79,514,055,594.40 (Seventy-nine billion, five hundred and fourteen million, fifty-five thousand, five hundred and ninety-four dollars, forty cents) and N231 million for economic losses caused by their operations in Nigeria.”  

He added in the affidavit submitted that FIRS assessed Binance’s income tax liabilities for both years and duly served the company with a demand notice. The affidavit claimed Binance had refused to pay, leading to the current lawsuit.

The FIRS lawsuit alleged that Binance operated in secret despite having a substantial economic presence in the country. Also, the violations cited breaches such as Nigeria’s Companies Income Tax (CIT) Act, the Federal Inland Revenue Service (Establishment) Act 2007, the CBN Regulatory Framework for Mobile Money Services, and the CIT Significant Economic Presence (SEP) Order.

For instance, the SEP Order stipulates conditions for which foreign and non-resident companies providing digital services and other operations become liable for taxation in the country.  It states that a foreign company has a significant economic presence in Nigeria if it derives an annual gross turnover of at least N25 million or its equivalent in other currencies from digital activities, among other criteria.

The SEP Order was signed by former Minister of Finance, Budget, and National Planning, Mrs. Zainab Shamsuna Ahmed, and made public by the federal government in May 2020.

Recall that on Monday, the tax agency began Binance’s trial in an alleged tax evasion case where the platform was accused of offering services such as cryptocurrency transactions and the remittance and transfer of those assets to Nigerians while failing to deduct the necessary VAT from those operations.

In June 2024, the FIRS dropped tax evasion charges against two Binance Senior Executives Tigran Gambaryan and Nadeem Anjarwalla (who fled from detention) and filed a new lawsuit against Binance as the sole defendant. 

Then, the tax agency amended its lawsuit, stating that Binance allegedly failed to collect and remit various categories of taxes to the federation, particularly the Value Added Tax (VAT) and Company Income Tax (CIT), as enshrined in Section 40 of the FIRS Establishment Act 2007 (amended).

Similar Read: FIRS begins trial of Binance over alleged tax evasion charges.

Physical presence charges against Binance

The affidavit submitted by Yusuf also noted that the federal government discovered that Binance had been operating in Nigeria for over six years without registration. This was allegedly confirmed by Gambaryan and Anjarwalla during a meeting with the Securities and Exchange Commission (SEC) in 2024, according to Yusuf. 

The special agent likewise claims that the cryptocurrency platform attested that for the year 2023, it recorded about 386,256 active users from Nigeria with a trading volume of $21.6 billion and a net revenue of $35.4 million.

The affidavit also levied a series of law breaches by Binance and its executives such as offering financial services without the necessary licenses and permits, violation of the Money Laundering Act, and Providing currency speculation services without proper authorization among others.

On another turn, Yusuf stated that Binance executives allegedly admitted that the platform had unlawfully listed and traded Naira but delisted the currency following an investigation by the Office of the National Security Adviser. Meanwhile, the agency found that this was a lie as the Naira was still accessible on its platform at the time, the official stated.

NSA also stated that the platform has refused to provide records of its business activities over six years as requested. 

“The defendants refused or neglected to make the complete information available to date (as of the filing of the pending suit in September 2024) despite an order from the Federal High Court mandating them to disclose such information to the FIRS through the Economic and Financial Crimes Commission (EFCC),” Yusuf stated.

Yusuf informed the court that FIRS also has another pending case against Binance over tax evasion.

For a refresher of the whole scenario. Recall that following the sudden crash of the naira currency in May 2023, the Federal Government of Nigeria accused Binance of involvement in disrupting the currency. As a result, the Economic and Financial Crimes Commission (EFCC) and FIRS separately sued Binance over alleged tax evasion, money laundering, and foreign exchange violations.