In a bill proposed by lawmakers in Kenya, they outlined plans to impose a 3% tax on cryptocurrencies, non-Fungible token (NFT) transfers, and a 15% tax on monetized online content.
The proposed bill known as “The Finance Bill 2023”, would require crypto exchanges and individuals to pay the tax on any income derived from the transfer or exchange of digital assets.
The bill was received mixed reactions from Netizens, with some commending the government’s recognition of cryptos and NFTs, while several others saw it as a targeted harassment to the crypto community in the country. The proposed 3% tax on crypto and NFT transfers according to several who shared their opinion disclosed that it is too high, hence it will discourage adoption.
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On Twitter, @CryptoHubKE wrote, “If the government is serious about Digital taxes, then the law must apply to everyone.. Everything digital… Anything short of that is targeted harassment!”
If the government is serious about Digital taxes, then the law must apply to everyone.. Everything digital… Anything short of that is targeted harassment! https://t.co/VoUck6GYx2
— CRYPTOCURRENCY KENYA ?? (@CryptoHubKE) May 4, 2023
@Lumpynews wrote, “Yeah this is a great way to just have crypto flow right around Kenya. Fantastic”.
If the bill is eventually passed into law, Exchanges not registered in Kenya would have to register under the tax regime. Also, the proposed 15% tax on digital content monetization may have implications for content creators, particularly those who rely on online advertising and sponsorships as a source of income.
According to the Revenue Authority Kenya (KRA), the Kenyan government is expected to generate $45.5 million (5 billion Kenyan shillings) in revenue from this tax.
Recall that in 2018, the Central Bank of Kenya (CBK) issued a circular to all banks operating in the country, warning them against dealing with cryptocurrencies or engaging in transactions with crypto-related entities. This saw banks in Kenya clamp down on customers using bank accounts for crypto transactions with some of them sending notices to customers purchasing cryptocurrency.
Despite the anti-crypto stance by the Central Bank, Kenya still leads Africa in crypto adoption and is ranked fifth in the world ahead of some of the developed countries like the United States, China, Russia, and South Africa. Around 8.5% of Kenya’s adult population own or hold cryptocurrencies.
Meanwhile, as the acquisition of cryptocurrencies and trading has continued to rise in Kenya despite warnings, it has prompted the government to explore taxation methods for crypto transactions. It is also seen as a positive step towards the recognition of cryptocurrencies as a legitimate asset class in the country.
This move also reflects a global trend as tax authorities and governments have sought to regulate the crypto market and generate revenue from it. Crypto taxation has also come as a trend around the world which has seen increased regulatory scrutiny of cryptocurrencies. The UK, EU, and other jurisdictions are looking to offer clear regulatory guidelines for the industry, particularly around the overall protection of investors amid likely risks from unregulated crypto exchanges.