Kenya is proposing new taxes that will target the digital economy in a bid to increase its domestic revenues and narrow the fiscal deficit amid an ongoing cash crunch. The proposed taxes will take effect in the next budget year beginning on July 1 if ratified in the finance bill. The East African country plans to charge a 3% tax on the transfer or exchange value of digital assets and increase the tax on online earnings for content creators from 5% to 15%.
Cryptocurrency exchanges like Binance or Yellow Card, or individuals facilitating the exchange or transfer of digital assets, will be required to withhold tax deductions and forward them to the country’s tax authority within 24 hours. The exchanges must first register with the tax authority to remit such deductions.
Kenya defines digital assets as “anything of value that is not tangible and cryptocurrencies, token code, number held in digital form and generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration that can be transferred, stored or exchanged electronically; and a non-fungible token (NFTs) or any other token of similar nature, by whatever name called.”
The Kenyan government has in the past expressed caution regarding cryptocurrencies, which are not recognized as legal tender. It has warned that they are unregulated and highly speculative, putting them at risk of losing value. The government has also stated that it cannot offer any protection if crypto exchanges go bust, as was recently witnessed with FTX.
