Kenya is considering introducing a new digital asset tax that would impose a 3% tax on cryptocurrency and nonfungible token (NFT) transfers and a 15% tax on monetized online content. The proposed bill, known as The Finance Bill, 2023, would require crypto exchanges and individuals to pay the tax on any income derived from the transfer or exchange of digital assets.
The bill has received a mixed response online, with some praising the recognition of crypto and NFTs in the country while others see it as targeted harassment of the crypto community. This article will provide an overview of the proposed bill, the potential impact on the crypto industry, and the response from the community.
The Details of the Proposed Digital Asset Tax
If passed, The Finance Bill, 2023 would require crypto exchanges or individuals who initiate the transfer of crypto or NFTs to collect a 3% tax on the transfers’ value to be paid to the government. Exchanges not registered in Kenya would have to register under the tax regime. The bill also seeks to bring about a tax on “digital content monetization,” levying a 15% tax on content creators paid to promote and advertise products and services online. This includes sponsorships, affiliate marketing, merchandise sales, and paid subscriptions.
The bill defines digital assets as “any asset that is issued or transferred using distributed ledger technology, including any digital representation of value used as a medium of exchange, a unit of account, or store of value.” It also specifically mentions NFTs, which have gained popularity in recent months, as falling under the scope of the proposed tax.
Potential Impact on the Crypto Industry
The proposed digital asset tax has received a mixed response from the crypto community. While some see it as a step forward in recognizing the legitimacy of crypto and NFTs, others view it as targeted harassment of the industry. The 3% tax on crypto and NFT transfers has been particularly controversial, with some arguing that it is too high and will discourage adoption.
Moreover, the requirement for crypto exchanges or individuals to collect and pay tax to the government may result in additional administrative burdens and costs for these entities. Exchanges not registered in Kenya would also have to register under the tax regime, which could deter foreign businesses from operating in the country. The proposed tax on digital content monetization may also have implications for content creators, particularly those who rely on online advertising and sponsorships as a source of income.
Response from the Community
The proposed digital asset tax has generated a range of reactions from the Kenyan crypto community. Some see it as a positive development recognizing the legitimacy of crypto and NFTs in the country. Others, however, view it as a targeted attack on the industry and argue that the tax will discourage adoption.
Some members of the community have taken to social media to express their opinions on the proposed tax. For example, Rufas Kamau, a Kenyan research and markets analyst, tweeted on May 4 calling the 3% tax “a joke” and sarcastically asked if it applies to “supermarket and credit card loyalty points. The group also pointed out that the tax was higher compared to the fees charged by exchanges, comparing the government’s proposed 3% tax to Binance’s 0.10% trading fee.
Conclusion
The introduction of a digital asset tax in Kenya is a significant development that reflects the growing global trend toward regulating cryptocurrencies and other digital assets. While the bill has been met with a mixed reaction online, it demonstrates the Kenyan government’s increasing awareness of the need to regulate digital assets and monetize online content. If the bill is passed into law, it will provide a legal framework for digital asset taxation and help to formalize the digital asset industry in Kenya.
