Banner 3 Banner 2
CryptoNews

Kenyans to pay 3 pc in taxes on the sale of digital assets

As of Friday (September 1), when the law enacting the new tax goes into effect, Kenyans will be compelled to pay a tax of 3% on the earnings they make by selling a digital asset. Kenya Digital Asset Tax

As the State looks to seize a piece of the expanding digital asset market, the Finance Act 2023 has added a digital asset tax that will be payable on income obtained from the sale of digital assets starting on September 1.

The tax will apply to a wide range of assets, including e-books, images, documents, films, logos, content, music, audio, animations, illustrations, and social media profiles. The Act defines digital assets as everything of value that is not tangible. It also comprises non-fungible tokens, digitally stored token codes or numbers produced by cryptographic techniques, and cryptocurrencies.

Kenya has roughly four million cryptocurrency owners, according to data from blockchain analytics company Chainalysis, which rates nations based on their use of cryptocurrencies. The blockchain industry across the African continent has also been recording massive growth especially in the last 5 years.

According to the Act, the platform where a digital asset is sold is required to withhold 3% of the sale price and send the remaining amount to the Kenya Revenue Authority (KRA) within five working days.

The owner of a platform or the person who facilitates the exchange or transfer of a digital asset shall deduct the digital asset tax and remit it to the commissioner.

says the Act

Additionally, if a non-resident owns the platform for exchanging digital assets, the owner must register under the simplified tax regime in order to remit the tax.

A person who is required to deduct the digital asset tax shall, within five working days after making the deduction, remit the amount so deducted to the commissioner together with a return of the amount of the payment, the amount of tax deducted, and such other information as the commissioner may require.

says the Act.

In his budget address to legislators, Treasury Cabinet Secretary Njuguna Ndung’u bemoaned the fact that despite a dramatic increase in the trading of digital assets in Kenya, the State was not profiting from it.

Despite the advantages brought about by digital platforms, the transactions usually conducted under the platforms are not in the tax net.

he said.

Tax experts contend that the KRA will face operational difficulties as a result of the short window granted to remit the tax, and that the levy will affect the trade of digital assets. Kenya Digital Asset Tax

Read Also: Upcoming Webinar to Explore Features of a good gambling platform in Africa

The requirement to remit the tax within five working days after making the deduction is administratively onerous. In addition, by taxing the turnover rather than the gains, the tax is likely to be a disincentive for persons seeking to engage in digital asset trading,”

said tax experts at KPMG in their analysis of the Act.

The decision to tax income derived from digital assets raises issues, according to analysts at Grant Thornton Kenya, such as the need for a potentially lower tax rate based on fair market value and addressing administrative obligations placed on platform providers who are typically non-residents.

The Act should clarify whether the proposed tax is final or if additional taxes may apply, and the effective date of September 1, 2023 may require revision to allow ample time for compliance implementation, particularly for non-residents.

said the analysts.

The government has not adequately defined digital assets, according to Rufas Kamau, a market analyst with Nairobi-based financial markets broker FXPesa, and the tax is harsh and inconsistent with other jurisdictions.

This would run the risk of fostering an illicit market for exchanging cryptocurrencies in an effort to escape taxes, he claimed.

I don’t think the government has defined digital assets well. If a company like Binance was to do this for all Kenyan traders, the traders would shift to another exchange that doesn’t require them to pay tax,”

A better way of implementing taxation in digital assets would have been a charge on the spread or commission earned by an exchange when they facilitate a cryptocurrency transaction. This would promote people to innovate in this sector and build value and employment.

Mr Kamau said while speaking to Nation on August 30.

As of Friday (September 1), when the law enacting the new tax goes into effect, Kenyans will be compelled to pay a tax of 3% from the earnings they make by selling a digital asset. Kenya Digital Asset Tax

Jeremiah Maangi

A trusted igaming leader & author for articles bringing positive change in the African gambling industry. African gambling domains broker. Intelligent knowledge of customer acquisition and retention strategies. Available for new & existing gambling operations consulting and marketing services in Africa. Crypto enthusiast.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button

You cannot copy content of this page