Starting from September 1, 2023, the Kenya Revenue Authority (KRA) will implement a 3% tax on the trading of digital assets as part of the newly introduced tax measures outlined in the Finance Bill of 2023.

A digital asset refers to anything that holds value, is digitally created and stored, and can be identified.

Under this new tax, individuals engaged in activities involving digital assets such as cryptocurrencies, non-fungible tokens (NFTs), data, images, videos, and written content will be required to allocate a portion of their transaction value to taxation.

According to the Act signed by President William Ruto on June 26, any entity responsible for deducting the digital asset tax must promptly transfer the deducted amount to the Commissioner, along with a report containing payment details, tax amount, and any additional information requested by the Commissioner.

The legislation defines a digital asset as something valuable that lacks physical form. This includes cryptocurrencies, codes or tokens generated through cryptographic methods, or other means that represent digital value for exchange, transfer, or storage electronically. Additionally, it encompasses non-fungible tokens (NFTs) and similar tokens.

While cryptocurrencies have gained international popularity, their adoption in Kenya has been limited.

The introduction of the Digital Asset Tax (DAT) has prompted concerns from experts who argue that the lack of regulatory framework in the Kenyan digital assets sector will render the tax ineffective and unbeneficial for the government.

Recently, the Kenyan government suspended the operations of Worldcoin, a cryptocurrency project initiated by US-based artificial intelligence company OpenAI, due to privacy concerns. The project required users to undergo eyeball scans for online identity verification during registration.

In June, the Central Bank of Kenya (CBK) expressed that the issuance of a digital currency was not a pressing priority, although it would continue to monitor advancements in the field for future decisions. The CBK cited the diminishing global appeal of Central Bank Digital Currencies (CBDCs) and emphasized the need to cautiously assess technology and innovation risks in the context of recent instability in the global crypto assets market.

Kenya’s move follows Nigeria’s introduction of a 10% digital assets tax in June, a mere two years after its central bank had initially banned cryptocurrency trading.

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