New Kenyan Digital Tax to Affect Crypto Platforms

Kenya Revenue Authority (KRA) has announced new regulations that compel users of digital marketplaces to pay digital tax.

At a rate of 1.5% on gross transaction value, the new tax is expected to take effect on Jan. 1, 2021.

According to a report, the KRA will create a special tax unit to track and tax transactions using “data-driven detection.”

Still, the report notes that “at this stage, the precise meaning of a digital market place and those who will be impacted by the digital tax is unclear.”

Kenya’s Finance Act broadly defines digital marketplace “as a platform that enables the direct interaction between buyers and sellers of goods and services through electronic means.”

The report asserts that cryptocurrency platforms “fall under the digital marketplace designation since they offer a platform for buyers and sellers of crypto through electronic means.”

Like many countries on the African continent, Kenya does not yet regulate cryptocurrencies although the report notes the KRA has been pushing the central bank to recognize these assets for revenue collection purposes.

Commenting on the lack of clarity of the new regulations, David Gitonga, founder & Managing Editor at Bitcoinke, says the digital tax will nudge Kenya towards the regulation of cryptocurrencies.

“I think this bill is going to put a spotlight on many digital activities, including crypto trading, and this might open the door to some form of crypto regulation,” said Gitonga.

He goes on to explain that “crypto regulation has long been ignored because there is a general lack of understanding of how fast this space is growing in Kenya.”

Kenya is consistently ranked as one of the top five African countries with high volumes of P2P bitcoin trading.

As the Kenyan government has been looking for more ways to raise tax revenues, Gitonga believes “they will now give the crypto space a second look once they realise revenues that are being generated, especially on P2P platforms operating in Kenya.”

He adds this will probably kickstart “talk around regulation in order to capture this market.”

Will Kenya succeed in enforcing this tax regulation? Tell us your thoughts in the comments section below.

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