Saturday, January 28, 2023
  • Cryptocurrency exchanges operating in Kenya are expected to pay a 20% excise duty on cryptocurrency transaction fees
  • Where cryptocurrency sold has been held for less than 12 months, the proceeds will be treated under the income tax regulation
  • Where the cryptocurrency sold has been held for longer than 12 months, the proceeds will be treated under the Kenyan capital gains tax system

Kenya’s Parliament is mulling over a bill which will, in effect, tax crypto transactions in the country. If the bill passes, it will levy excise duty on crypto transaction fees and either income tax or capital gains tax on cryptocurrency sales by Kenyans. This may signal a move towards regulation in the country.

The Bill, which Mosop member of Parliament Abraham Kirwa sponsors, will move Kenya somewhat forward in the regulation of crypto. Kenyan cryptocurrency exchanges and crypto-holding citizens are the targets of the Bill, which is very specific in how it plans to treat the income and gains from crypto trading.

Excise Duty on Cryptocurrency exchanges

Cryptocurrency exchanges operating in Kenya are expected to pay a 20% excise duty on crypto transaction fees. Excise duties are direct taxes levied on specific activities and are almost universally passed on to the end user. So Kenyans can expect crypto transaction fees to increase by at least 20%. Kenya levies similar excise duty on bank transactions.

Income Tax and Capital Gains Tax on Cryptocurrency sales

For individuals, the bill has two approaches. Where cryptocurrency sold has been held for less than 12 months, the proceeds will be treated under the income tax regulation.  The Kenya Revenue Authority currently charges personal income tax on a marginal basis. Individuals can expect to pay between 10 and 30% on cryptocurrency earnings.

Kenya cryptocurrency tax web3africa.news

The proceeds will be treated under the Kenyan capital gains tax system, where the crypto sold has been held for longer than 12 months. In this case, Kenyans will pay 5% of the gain made on cryptocurrency. So they will be allowed to subtract the cost of the crypto and incidental costs and then pay 5% on the gains made.

Kenyans sceptical about motivations

As one can imagine, Kenyans have reacted to the move with scepticism. Many have questioned the motivations of the Kenya Revenue Authority. Suggestions are that they seek to reap where they did not sow, taking advantage of the huge popularity of crypto in Kenya without contributing to the ecosystem.

Others have questioned whether the Kenya Revenue Authority has jurisdiction over cryptocurrency. This is a fair question, as Kenya does not have a regulatory policy on crypto. The bill’s timing has also been questioned in light of the crypto winter and its effect on crypto holding values.

The desire to widen the tax base and, therefore, the revenue of the east African nation is understandable. Still, it smacks of taking advantage of Kenyan’s appetite for cryptocurrency rather than a desire to improve the ecosystem. Kenya ranks second in Africa for the rate of crypto ownership among citizens. The adoption rate is likely to increase.

Kenya Crypto tax may be a blessing in disguise

Unlike many other African countries, Kenya does not have an explicit or implicit ban on cryptocurrency. The government has instead continuously warned Kenyans to tread with caution when dealing with cryptocurrencies. South Africa, which recently regulated cryptocurrency, also started by taxing gains on crypto through the South African Revenue Services (SARS).

With that in mind, the move to tax cryptocurrency shows that Kenya is warming up to crypto’s widespread usage. This is in spite of the Central bank of Kenya chief not warming up to the idea of holding Kenya’s foreign currency reserves in Bitcoin or any other crypto.

Newsletter

Subscribe my Newsletter for new blog posts, tips & new photos. Let's stay updated!

Leave a Comment

Web3 Africa

Community

We believe that the most important thing in the Blockchain revolution is the ability of people to understand and embrace the change. Our journalism standards – impartiality, truthfulness, transparency, and accuracy – will help you navigate this extremely dynamic world.

@2022  All Right Reserved.

Are you sure want to unlock this post?
Unlock left : 0
Are you sure want to cancel subscription?