Table of Contents
Kenya is considering implementing a 3% tax on cryptocurrency and non-fungible token (NFT) transfers as part of the country's proposed budget.
Latest Budget Proposes Crypto Tax
The latest budget proposal for the country has a contingency for taxing crypto transactions, including NFT transfers. The Finance Bill 2023, presented to the Kenyan parliament on May 4 by the country’s finance ministry, the National Treasury, has proposed levying a 3% tax on all “income derived from the transfer or exchange of digital assets.” The proposal has also included NFTs in its definition of “digital assets.”
Crypto exchanges or those who initiate the transfer of crypto or NFTs would be required to collect the tax, having to deduct 3% of the transfers’ value to be paid to the government. Exchanges not registered in Kenya would have to register under the tax regime.
As just a proposed bill, the legislature has a long journey ahead before it can become law. It will need to pass through five rounds of readings, committees, and reports by the National Assembly. In the next major step, it will end up at the President's desk, who will take the final call to pass it into law.
Raising Funds Through High Taxes
The proposal intends to raise revenue for the East African country, which has been facing an economic crisis since the COVID-19 pandemic. The pandemic has hit the Kenyan economy hard, with many businesses shutting down and unemployment rates skyrocketing.
The bill is also looking to generate revenue for the government by taxing digital content monetization. This means that online celebrities and influencers could have to give up 15% of their earnings on monetized content on social media platforms such as Facebook, Twitter, YouTube, TikTok, and Instagram. The scope of the taxable earnings will extend to brand deals and sponsorships, affiliate marketing, merchandise sales, and paid subscriptions.
Additionally, the bill also proposes to increase taxes on cigarettes and alcoholic drinks, as well as introduce a tax on plastic waste.
Where Does Kenya Stand?
The proposed tax has received mixed reactions from the Kenyan cryptocurrency community. Some believe that the tax will help regulate the industry and generate revenue for the government, while others fear that it may stifle innovation and drive away investment. In addition, the governor of the Central Bank of Kenya has shown an aversion to the trend of converting the country’s reserves into Bitcoin, even though the institution has been exploring its CBDC options.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.