According to the ruling party, this will replenish the state treasury, reducing the country’s dependence on expensive foreign loans from China, the International Monetary Fund (IMF) and the World Bank. The new taxation came into force on July 1. It includes a 1.5% residential tax, a doubled fuel surcharge to 16%, a 5% withholding tax for creators of digital content, and a 3% tax on digital assets on the value of the crypto asset being transferred or exchanged.
Platform owners must pay this tax, and in the case of offshore platforms, they will have 24 hours to remit the funds to the Kenya Revenue Service.. Local cryptocurrency traders are concerned that this tax is too high for them because they make small profits. Industry participants believe that the government should start by informing owners of crypto-assets about this tax and how it should be remitted.
For example, the Blockchain Association of Kenya (BAK) called the new law too vague. The association believes that tax authorities should treat non-transferable tokens (NFTs), equity tokens, stackablecoins and utility tokens differently.
“Taxing all digital assets ‘in one comb’ could stifle innovation. We need to impose taxes depending on the uses of each crypto-asset,” BAK stated.
The association noted that the new tax does not take into account loss-making transactions or zero-profit transfers, where users can simply move cryptoassets between their wallets. The high volatility of digital assets means that not all trades are profitable. Ignoring this aspect could lead to unfair taxation of traders and severely slow down the development of the industry in the country, BAK said.
Recall that in April, a bill was submitted to Kenya’s Parliament, according to which cryptocurrencies should be regulated as securities.