Digital asset and non-fungible token (NFT) owners in Kenya will have to pay a 3% tax on all transfers under the proposed 2023 Finance Bill.
Kenya has emerged as one of the global leaders in digital asset adoption. United Nations estimates that 4.25 million Kenyans (8% of the population) own digital assets, while Chainalysis ranks it in the top 20 countries for adoption.
The East African country is looking to tap this growing mass of Bitcoin users to shore up its fiscal deficit. Under the new bill, Kenyan digital asset owners will have to pay a 3% tax on the transfer or exchange value of a digital asset.
From the Finance Bill 2023 for the crypto people:
"Notwithstanding any other provision of this Act, a tax to be known as digital asset tax shall be payable by a person on income derived from the transfer or exchange of digital assets" pic.twitter.com/v0PeQjSLO5
— Mwango Capital (@MwangoCapital) May 4, 2023
The bill defines a digital asset as “anything of value that is not tangible and cryptocurrencies, token code, numbers held in digital form and generated through cryptographic means or otherwise…providing a digital representation of value exchange with or without consideration that can be transferred, stored or exchanged electronically.”
A digital asset can also mean “a non-fungible token or any other token of similar nature.”
This isn’t Kenya’s first attempt at taxing digital assets. Last November, lawmakers proposed the Capital Markets (Amendment) Bill 2022, imposing taxes on exchanges, wallets, and traders. It required Kenyans to pay capital gains tax for assets held longer than 12 months and income tax for assets held for a shorter time.
The reception has been mixed. Some believe that taxation will legitimize crypto in East Africa’s largest economy. Despite being a global leader in adoption, Kenya still lacks basic digital asset regulations. Most banks in the country shun the industry and refuse to offer services to digital asset companies or traders.
However, others argue that the tax is exploitative.
“If the government is serious about digital taxes, then the law must apply to everyone. Everything digital…Anything short of that is targeted harassment,” said the local advocacy group Cryptocurrency Kenya.
Watch: Discussion: How NFTs are bridging the gap across platforms
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