The Kenyan government recently announced that it would start imposing a 1.5% tax on revenues generated by international cryptocurrency exchanges. This move is an attempt to extract revenue from digital asset platforms that have previously evaded taxation. It is estimated that around four million Kenyan residents utilize these exchanges for their cryptocurrency transactions.
Digital Tax Service Effective Since 2021
Kenya’s digital tax service has been in effect since January 1, 2021, with expectations to generate approximately $45.5 million (5 billion Kenyan shillings) in revenue. The country has been striving to capitalize on the burgeoning cryptocurrency market and ensure that it receives its fair share of tax revenue from the industry.
The 2023 value added tax (VAT) laws, which encompass digital, internet, and digital market supply, have been published by Treasury Cabinet Secretary Njuguna Ndung’u. These new regulations enable Kenya to target global cryptocurrency exchanges, ensuring that they contribute to the country’s tax revenue.
The published regulations state that, for the purposes of these Regulations, a taxable electronic, Internet or digital marketplace supply includes the facilitation of online payment for, exchange, or transfer of digital assets, excluding services exempted under the Act.
Continued Cryptocurrency Popularity Despite Warnings
Despite repeated warnings from the Central Bank of Kenya and its governor, Kenyan residents continue to acquire and trade cryptocurrencies. The new tax measure will seek to address this growing trend and ensure that the government can benefit from the expanding digital economy.
Kenya’s 1.5% tax on international cryptocurrency exchanges reflects the nation’s recognition of the digital economy’s potential. Targeting global exchanges allows for increased tax revenue and responsible industry growth. Despite Central Bank warnings, the enduring popularity of cryptocurrencies among Kenyans highlights the importance of implementing tax regulations in this growing sector.