Kenyans dealing in cryptocurrencies such as bitcoins will give the Kenya Revenue Authority (KRA) three percent of the amount they earn from selling digital asset under proposed regulations contained in the Finance Bill 2023.
This is after the National Treasury proposed the introduction of a digital asset tax (DAT).
The new tax, which sources at the KRA said will be set at three percent, will also affect those trading in non-fungible tokens (NFTs).
“Notwithstanding any other provision of this Act, a tax to be known as digital asset tax shall be payable by a person on income derived from the transfer or exchange of digital assets,” reads part of the Finance Bill.
The Bill defines the “digital asset” as anything of value that is not tangible and cryptocurrencies, token code, number held in digital form and generated through cryptographics.
Digital assets, therefore, include cryptocurrencies such as bitcoins, data, images, video, and written content.
Cryptocurrencies such as bitcoins are becoming popular with Kenyans, despite public warnings of the risks of their high volatility by the financial regulator.
A United Nations Conference on Trade and Development report released in June last year said that 8.5 percent of the population or 4.25 million people own cryptocurrencies in the country.
This places Kenya ahead of developed economies such as the United States in terms of percentage of ownership which is ranked sixth with 8.3 percent of its population owning digital currencies.
The Bill requires the owner of a platform or the person who facilitates the exchange or transfer of a digital asset to deduct the digital asset tax and remit it to the Commissioner.
Exchanges for digital assets that are not registered in Kenya shall register under the simplified tax regime.
“A person who is required to deduct the digital asset tax shall, within twenty-four hours 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.”
For the platforms facilitating the buying and selling of digital assets, the Treasury has also published regulations guiding the payment of the digital service tax at 1.5 percent on the fees these exchanges earn.