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KRA poised to cash in as investors reap record crypto gains
In the financial year ending June 2025, KRA eyes a six-fold increase in the collections from the crypto industry to at least Sh60 billion, raising tax revenue by about 2.4 percent.
The Kenya Revenue Authority (KRA) is poised to tap the record gains reported in the global market this year, after revamping efforts to tax the traditionally hard-to-tax industry.
Cryptocurrencies – virtual forms of money not issued by a central monetary authority and are traded online – have recorded a historic surge in value this year, fuelled by Donald Trump’s victory in the recent US election.
Data from industry tracker CoinMarketCap shows that investors in the industry have realised gains of at least 127 percent this year, with the total value of the digital assets held in the market rising from $1.66 trillion (Sh214 trillion) in January to $3.7 trillion (Sh478 trillion) in early December – the highest level ever recorded.
The taxman, which recorded its first-ever Sh10 billion tax collections from the crypto industry this year, is set to benefit from this windfall for investors as Kenya has one of the most vibrant markets on the continent.
Currently, there are about 729,200 cryptocurrency users in Kenya.
In the financial year ending June next year, KRA eyes a six-fold increase in the collections from the crypto industry to at least Sh60 billion, raising tax revenue by about 2.4 percent.
In general, the tax authority estimates that between 2021 and 2022, Sh2.1 trillion or 20 percent of Kenya’s GDP was transacted in the crypto industry, highlighting its potential as a tax revenue contributor to the State.
“With this potential, it has become increasingly important for the KRA to develop a system to track and collect taxes on cryptocurrency transactions,” KRA said in a statement in October.
Cryptocurrencies are still not properly regulated in Kenya, and the Central Bank of Kenya has yet to greenlight commercial banks to deal with any companies or individuals in the industry.
However, the Finance Bill of 2023 introduced a three percent tax on crypto transactions, making it the first time the sector was brought into the tax bracket, even though the State had yet to draw up a plan to track the dealings in the industry.
Many sceptics questioned whether it would be possible to collect taxes from the sector, despite the tax being passed by parliament, given the lack of any form of regulation of the industry.
“A regulatory framework for licencing and regulating crypto companies would have to be implemented along with a bill to establish crypto regulations,” Rufas Kamau, an analyst at FXPesa said last June.
Besides, a Bill currently in Parliament that seeks to recognise cryptocurrencies as securities, bringing them under the regulatory purview of the Capital Markets Authority, there is yet to be any formal regulation of the space.
The Capital Markets (Amendment) Bill, 2023 seeks to introduce taxation on crypto exchanges and digital wallets and imposes transaction taxes akin to excise duty charged on bank transactions. The Bill wants crypto traders to pay KRA capital gains for the market value of the assets.
The proposed amendment includes specific provisions to regulate the digital currency transactions in Kenya, its creation through crypto mining, regulation of digital currency trading, provide for its taxation and ownership, and provide for the promotion of innovation in the sector.
Former KRA chairman Anthony Mwaura said that the amount collected from the industry in the last financial year came from some 384 taxpayers, implying that they paid voluntarily.
“These people of cryptocurrencies, they want to pay taxes but we’re unable to reach them,” Mr Mwaura said, adding that KRA is in talks with the CBK to set up a technical team to chart how to bring the crypto sector into the tax net.
KRA said that the anonymity of cryptocurrency transactions has made it challenging to identify and track taxpayers who engage in cryptocurrency transactions hence the decision to directly monitor transactions on the trading platforms and exchanges.
“The system should be able to track and record cryptocurrency transactions, calculate taxes owed, and provide a seamless payment process for taxpayers. The system should also be able to integrate with existing KRA systems and provide real-time reporting and analytics” the taxman said in a brief of its targeted new tax system.
“The goal is to have a robust and efficient system that will enable the KRA to collect taxes on cryptocurrency transactions effectively and efficiently” KRA added.
