Kenya plans to grow its internal revenue and narrow its fiscal deficit by introducing new taxes targeted at the digital economy. It is also aimed at managing the ongoing cash crunch. If the proposal in the finance bill is corrected, then the taxes will be implemented from July 1st in the coming budget year. The tax proposes that content creators pay 15% on online earnings and 3% for all transfers or exchanges of the value of digital assets.
Anyone handling the exchange of digital assets like cryptocurrencies is expected to hold off tax deductions and forward them to the tax authority in the country within 24 hours. Facilitators of this exchange must first register with the tax authority before carrying out such an action.
For context, Kenya defines a digital asset as “anything of value that is not tangible and cryptocurrencies, token code, numbers held in digital form and generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration that can be transferred, stored or exchanged electronically; and a non-fungible token (NFTs) or any other token of similar nature, by whatever name called.”
The Kenya government presently does not recognize crypto as a legal tender and has expressed that it cannot assist in any crypto-related case that goes sideways, as witnessed in the FTX case. Crypto is seen as volatile and risky hence the stance of the Kenyan Government.
According to the 2021 report from Chain Analysis, Kenya is Africa’s top nation in cryptocurrency ahead of Nigeria. Over the past few months, they have softened their stance on crypto. They plan to work on a legal model for crypto assets so they can also benefit from the ever-increasing cryptocurrency adoption.
This tax aims to ensure digital assets are taxed like every other economic activity so that the government can also receive revenue from digital assets. This move is expected to increase internal revenue and reduce the fiscal deficit, a significant concern to the Kenyan Government in recent years.
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