Kenya Takes a Stand: Crypto Exchanges to Face Taxation on Revenue Earned

"Kenyan Treasury Cracks Down on Tax-Avoiding Crypto Exchanges, Imposes 1.5% Tax on Revenues Earned"

Kenya’s Treasury Cabinet Secretary, Njuguna Ndung’u, has published new regulations that impose a 1.5% tax on revenues earned by global cryptocurrency exchanges used by the country’s estimated four million users. The digital tax service became effective on 1 January 2021, and the Kenyan government hopes that it will enable it to extract revenue from leading crypto exchanges and tax-avoiding digital asset platforms. The Kenya Revenue Authority has estimated that the tax will bring in KES5bn ($45.5m). The new regulations come as Kenya, alongside Nigeria and South Africa, has one of Africa’s highest proportions of the population owning crypto.

The Central Bank of Kenya (CBK) and its governor have warned residents against dealing with cryptocurrencies such as bitcoin. Despite these warnings, Kenyan residents continue to acquire and trade cryptocurrencies. The country’s government has thus sought ways to levy taxes on crypto transactions. The new regulations will enable Kenya to target global crypto exchanges, as well as facilitating online payment for, exchange or transfer of digital assets, excluding services exempted under the Act.

The new regulations are part of Kenya’s wider efforts to regulate the digital market. In 2020, the country imposed a 1.5% digital tax on income from services provided through a digital marketplace, such as online marketplaces and platforms offering streaming services. The government has also proposed new laws to regulate online betting and gambling, as well as the use of social media.

However, some critics have raised concerns about the impact of these regulations on small businesses and start-ups that rely on digital platforms. They argue that the new taxes could increase the cost of doing business and reduce the competitiveness of Kenyan firms in the global digital market. Others have also warned that the regulations could stifle innovation and limit the potential benefits of digital technologies for the country’s economy.

Despite these concerns, the Kenyan government has defended its regulatory approach, arguing that it is necessary to ensure a level playing field and prevent tax evasion. The government has also highlighted the potential benefits of the digital market for the country’s economic growth and development. It has thus called for greater collaboration between regulators, businesses and other stakeholders to promote responsible digital innovation and investment in Kenya.

In conclusion, the new regulations imposing a 1.5% tax on revenues earned by global cryptocurrency exchanges used by Kenya’s estimated four million users are part of the country’s wider efforts to regulate the digital market. While some have raised concerns about the potential impact of these regulations on small businesses and start-ups, the Kenyan government has defended its regulatory approach, arguing that it is necessary to ensure a level playing field and prevent tax evasion. The government has called for greater collaboration between regulators, businesses and other stakeholders to promote responsible digital innovation and investment in Kenya.

Martin Reid

Martin Reid

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