Kenya’s lawmakers are considering introducing a new bill that would impose a tax on cryptocurrency and non-fungible token (NFT) transfers and monetized online content.
On May 4, The Finance Bill 2023 was presented to the Kenyan parliament proposing the creation of a digital asset tax on “income obtained from the exchange or transfer of digital assets,” with a specific provision included for non-fungible tokens (NFTs).
Assuming the bill gets approval, it would make it compulsory for individuals initiating transfers of digital assets like cryptocurrencies, NFTs, and cryptocurrency exchanges to collect and remit a 3% tax on the transfer’s value to the Kenyan government. Besides, any exchange not registered in Kenya must register under the new tax system.
The proposed bill also aims to impose a tax on the monetization of digital content, with a 15% levy on income earned by content creators who promote or advertise products and services online through sponsorships, affiliate marketing, merchandise sales, and paid subscriptions, among other means.
If the bill is approved, it will undergo a comprehensive process of five rounds of readings, committee reviews, and reports by the National Assembly before it can be sent to the president for final approval.
Mixed responses in Kenya to proposed tax on digital assets
The proposed tax on digital assets has elicited mixed reactions online. Some individuals in Kenya have expressed satisfaction that digital assets, including crypto and NFTs, are now officially recognized in the country. However, the Central Bank of Kenya had previously cautioned against using crypto without putting a complete ban in place.
Cryptocurrency Kenya, an advocacy group for crypto in Kenya, praised the bill while stating that the digital tax should apply to all digital transactions rather than targeting crypto and NFTs alone.
The group further opined that a crypto-only tax amounts to “targeted harassment” and observed that the proposed tax is higher than the fees charged by exchanges such as Binance, which has a 0.10% trading fee.
In 2022, Kenya elected William Ruto as its president when regulators had not proposed any crypto regulations. Ruto was viewed as more supportive of crypto than his opponent Raila Odinga.
Later in 2022, lawmakers attempted to regulate crypto by introducing amendments to capital market laws requiring reporting crypto-related activities to authorities.
The latest bill proposing a tax on digital assets could be seen as a first step towards regulating the crypto space in Kenya, although it does not necessarily legitimize it. Other countries have also introduced similar measures in recent times.
According to a United Nations report, Kenya has a relatively high adoption rate of crypto, with approximately 8.5% of the population, or 4.25 million people, owning cryptocurrencies.