The draft Finance Bill 2023, is currently the discussion of parliament, and members of the public have been invited to share submissions. The digital assets tax stands out, as the government seeks to amend various laws with the goal to increase revenues collected.
Bitcoin and Non-Fungible Tokens (NFTs) are now defined as digital assets in the proposed bill. This is the first time the Government of Kenya (GOK) has shown its hand in the taxation of cryptocurrency.
The Bill has proposed to introduce a digital assets tax, a 3% levy on the transfer charges applied during the exchange of the assets which cover cryptocurrencies, digital currencies, and non-fungible tokens (NFTs).
Moreover, the tax will be due even when the exchange is via a barter system.
Digital Assets Regulation
This appears to be the first step by the government of Kenya to regulate this industry. As of now, there has been no regulatory framework to offer guidelines for the sector.
Based on a number of studies, it is estimated that about 4 million Kenyans hold cryptocurrencies.
This is a significant number and it explains why cash-strapped GOK has introduced the tax.
Currently, it remains unclear what infrastructure will be used to collect this tax.
As of now, the law does not require digital asset owners or exchanges to be registered within Kenya.
If a Kenyan tax domicile conducted a transaction that was concluded outside the country, the Kenya Revenue Authority (KRA) would have no oversight over the transaction.