The Kenyan government is reportedly considering new tax measures affecting cryptocurrency transactions, online advertisement, and NFT transfers.
On May 4, The Finance Bill 2023 was brought to the Kenyan parliament with a proposal to enact a tax on “income obtained from the exchange or transfer of digital assets,” with a particular provision for non-fungible tokens (NFTs).
If the law is passed, it would be necessary for anybody starting a transfer of a digital asset, such as a cryptocurrency, an NFT, or a cryptocurrency exchange, to collect and send the Kenyan government a 3% tax on the value of the transfer. Additionally, under the new tax system, any exchange that is not registered in Kenya must register.
The proposed legislation also seeks to impose a tax on the commercialization of digital content, with a 15% surcharge on the money received by content producers that sell or advertise goods and services online, including via sponsorships, affiliate marketing, the sale of goods, and paid subscriptions.
Before being delivered to the president for final approval, the law must pass a rigorous procedure that includes five rounds of readings, committee assessments, and National Assembly reports.
Online responses to the proposed tax on digital assets have been conflicted. Kenyans have expressed their happiness with the country’s recent formal recognition of digital assets like cryptocurrency and NFTs.
The Central Bank of Kenya has earlier issued a warning against using cryptocurrencies without imposing a total ban. A crypto advocacy organization in Kenya called Cryptocurrency Kenya applauded the measure but said that the digital tax should include all digital transactions rather than only focusing on crypto and NFTs.
Additionally, the organization said that a tax that solely applies to cryptocurrencies is “targeted harassment” and pointed out that the proposed tax is greater than the costs levied by exchanges like Binance, which has a 0.10% trading fee.
Kenya chose William Ruto as its president in 2022 despite authorities not having recommended any crypto rules at the time. Compared to presidential rival Raila Odinga, Ruto was seen as being more pro-crypto.
Later in 2022, legislators introduced modifications to capital market rules mandating reporting of cryptocurrency-related activity to authorities in an effort to regulate cryptocurrency.
Although it does not necessarily legitimate the cryptocurrency industry in Kenya, the most recent measure that proposes a tax on digital assets might be considered as a first step towards its regulation. Similar policies have recently been implemented in other nations.
Approximately 8.5% of Kenya’s population, or 4.25 million individuals, possess cryptocurrencies, according to a United Nations assessment. Kenya has a comparatively high adoption rate for cryptocurrencies.
