Kenyan Legislators Set to Impose 3% Tax on Crypto Assets
An official report from the Kenyan Finance Ministry reveals that the incoming budget will impose a 3% crypto tax to increase government revenue. The new crypto taxation regime aims at curbing the existing fiscal deficits caused by the decline in the value of the Kenyan Shilling.
The report stated that the legislator plans to introduce a 3% tax on crypto-related transactions in Q2. Correspondingly, the new taxation regime will subject Kenyan content creators to remit 15% taxes to the government from the revenue generated from online tasks.
Kenya Proposes New Crypto Tax Regulation
Based on the Kenya constitution, the Cabinet Secretary for the National Treasury, Njuguna Ndungu, will submit the proposed FY 2023-24 budget to the parliament on June 8. Notably, if the budget gets approved by the members of the parliament, the new crypto tax policy will take effect on July 1.
The new taxation regime will subject the Kenyan digital assets service providers (DASP), such as Binance, and Yellow Card, to a 5% withholding tax. Additionally, the policymakers in Kenya have outlined the procedures for remitting the crypto tax.
In light of the legislator’s proposal, all the tax reports generated from the payment of the withholding tax should be submitted to the Kenya Revenue Authority (KRA) within 24 hours. Also, the DASP operating in the East African country are expected to comply with the KRA requirements fully.
The report mentioned that the crypto exchange in Kenya should complete the registration process with the KRA before remitting their taxes. Even though Kenya has not legalized crypto as a legal tender, the country has a rising crypto-savvy population.
Over the past, the Kenyan authority has warned the public about the risks and price volatility of crypto assets. The regulators consider digital assets as high-risk assets, which might expose the customer to huge losses.
Overview of the Kenyan Crypto Bill
Nonetheless, after the fallout of the Bahamian crypto exchange, the Kenyan government urged the investors to be vigilant in digital investment. They labeled digital assets as unregulated platforms that can expose customers and investors to massive losses.
In their early warnings, the regulators revealed that the authority faces multiple challenges in protecting crypto exchanges from crashing. Therefore to prevent the recurrence of the FTX saga, the regulators implemented proactive measures to safeguard the customers and investors from engaging in exploitative business.
According to the May 5 report captured on a Kenyan news site, the legislators clearly defined digital assets’ fundamentals and principles. In their report, the legislator referred to digital assets as digitized intangible products created through cryptographic technology. These digital assets hold a measurable value that can be transferred electronically.
Review of Crypto Adoption in Kenya
In the meantime, the legislators are pushing for the formulation of a friendly legal framework for cryptocurrency. The Kenyan government plans to create a neutral legal environment to increase crypto adoption in the region.
According to data captured by Chainalysis, Kenya, crypto adoption ranked second in Africa and nineteenth globally. Also, Kenya ranks among the top five countries with a high number of peer-to-peer transactions. In 2022 more than 4.25 million Kenya owned measurable amounts of crypto assets.
Besides the new regulation in cryptocurrency, the legislators proposed introducing a tax on online businesses. The new bill proposed that sponsored content, such as promotions and affiliate marketing, will be taxed in Q2 of 2023.
The legislators outlined the main categories in entertainment, education, artwork, and social media platforms that will be subjected to taxation in July. In particular, the regulators will deduct a standard tax from earnings generated from subscription services.
Under this category, the monthly and annual subscription that initially requires the audience to pay a specific amount of money to access the content will be taxed. Such content includes eBooks, online courses, promotion services, catchphrases, and logos.
Beyond this, the legislator will tax the income generated from membership programs that support content creation. The new bill will minimize the profit from licensed products such as music, photographs, and other crowdfunding projects.
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