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The Kenyan government will impose a 3% tax on cryptocurrency transfers.

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The Kenyan government will impose a 3% tax on cryptocurrency transfers.

The Kenyan Ministry of Finance has proposed a new finance bill that will introduce a 3% transfer tax on cryptocurrency and NFT transactions in the next budget year. It also stated that individuals and corporate entities earning income from crypto assets will be required to pay taxes.

Discussion Arises Regarding Taxation on Crypto Assets

According to statistics, over 8.5% of Kenya's total population, which is over 4.25 million people, own crypto assets. Kenya is set to introduce new fiscal legislation that will allow banks, exchanges, and individual wallets to levy taxes on the transfer of cryptocurrencies and all crypto assets, with the entire bill expected to bring in approximately $20 billion USD in revenue for Kenya starting in July.

Under this, individual trading or mining activities will be subject to a 10% - 30% personal income tax based on the activity; transfers of cryptocurrencies and NFTs will incur a 3% tax; and companies operating crypto asset-related services will be required to pay the locally prescribed Capital Gains Tax (CGT) with a 5% tax for marketing services and a 15% withholding tax for online content monetization.

In response to this, the blockchain technology advocacy group Cryptocurrency Kenya stated on Twitter: "Crypto exchanges like Binance charge users 0.01%-0.05% in fees, the government's 3% tax to the people is relatively high."

They also pointed out:

If the government is serious about crypto taxation, the law must apply to all things related to crypto and digitalization, any shortcomings will be considered "targeted harassment."

Definition of Crypto Assets in the Bill

In the newly released Income Tax Bill, a definition for "crypto assets" is provided:

"Includes anything intangible and valuable held in digital form and generated through encryption or other means, capable of being electronically transferred, stored, and exchanged, and capable of generating income through transfer and exchange, including NFTs and tokens similar or meeting the above characteristics, regardless of their name, are considered crypto assets."

It is worth noting that Kenya is not the first country to impose taxes on crypto assets. Previously, India's strict crypto tax laws that disregarded industry requests were criticized as "stifling crypto industry development" and as a law with "more harms than benefits."

In November 2022, Kenya initially proposed regulatory measures for cryptocurrencies, amending its capital markets laws to require individuals holding or trading cryptocurrencies to record and report relevant information to authorities. While clear tax regulations are now being drafted, it remains uncertain whether the people's crypto assets are adequately protected.