Digital Assets Tax Legal Basis Challenged in Court

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Blockchain Association of Kenya petitions Digital Assets Tax in court

Blockchain Association of Kenya (BAK) has filed a petition to challenge the legality of the Digital Asset Tax which comes into effect today 1st Sept 2023. The petition by BAK has been filed at the High Court.

Consequently, the court has set the 28th of September 2023 as the date for the mention of the interim Application.

The Digital Asset Tax 3% tax was introduced by the Finance Act 2023. The tax shall be imposed on the gross value of any transfer or exchange of Digital Assets. According to the Finance Act 2023, crypto, Non-Fungible Tokens (NFTs),e-tickets, and potentially any digital asset holding value is subject to taxation.

Moreover, the tax will be due even when the exchange is via a barter system.

Digital Assets Tax Stifles Growth

The core focus of the petition is to thoroughly examine the legal and constitutional dimensions surrounding the imposition of this tax on digital assets.

In fact, BAK deems the tax a setback that may have a negative impact on the nascent sector and innovation in general.

“We are deeply committed to advocating and lobbying for a conducive environment for innovation while ensuring legal clarity. Our petition aims to address concerns about the DAT’s impact on both our industry and the broader economy.” : reads part of the press release.

In BAK’s view, the digital assets tax would stifle the cryptocurrency sector in Kenya. Kenya is yet to regulate the sector.

However, the introduction of the digital assets tax indicates the government may be warming up to the growing industry.

Currently, it is estimated that about 4 million Kenyans hold cryptocurrencies. In fact, Kenya leads in Web 3 adoption across the East African region. The speedy growth of the sector and the implementation of Blockchain has spurred economic development.

Notably, Blockchain technology funding in Africa grew by 1,668% in 2022.