KRA Digital Economy Tax Office Manager Nickson Omondi has announced plans to introduce a real-time tax collection system integrated into exchanges. Through this initiative, KRA aims to increase Kenya’s tax base and tap into the growing industry, which reported cryptocurrency transactions of approximately $18.6 billion in 2022.
KRA emphasized its tax plan for the 2024/25 fiscal year, confirming that the new system will monitor and track transaction details such as type, date, value, and time. Despite the lack of clear regulations from the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA), exchanges such as Coinbase and Binance continue to serve the Kenyan cryptocurrency market.
KRA acknowledges that the outdated system is ineffective in monitoring cryptocurrency taxation.
Tax officials revealed that the Kenya Revenue Authority (KRA) will integrate a new tax system with cryptocurrency exchanges and markets to track and record all transactions in real-time.
This is part of a strategy to catch tax evaders in a largely secretive segment of the market, …
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Efforts by KRA to integrate the tax collection system into cryptocurrency exchange platforms have been hindered by the uncertain legal framework of Kenyan exchanges, according to afcacia.io.
Omondi from KRA confirmed the introduction of digital service tax and value-added tax in 2021. These two taxes specifically apply to non-resident individuals, entities, or multinational corporations that provide services to Kenyan consumers without a physical presence in Kenya. They allow the government to tax individuals or institutions profiting from the Kenyan digital market.
On September 1, 2023, a legal change allowed cryptocurrency investors to enter the market. Prior to this, it needed clarification whether cryptocurrency investors should pay capital gains tax, turnover tax, or withholding tax. According to the 2023 Finance Act, the current tax system came into effect on September 1, requiring exchanges to remit 3% to the Kenyan government through KRA’s new system. This law also applies to all forms of digital assets, including NFTs.
When asked about how exchanges can remit the 3% tax, Omondi stated that while some exchanges are complying with the regulations, the matter is still under discussion. He said the Central Bank of Kenya has advised Kenyan banks not to directly engage with cryptocurrency exchanges, although it has not been declared illegal. He added that precedents worldwide recognize all taxes as legal, including taxes levied on illegal activities.
KRA outlined the declaration and remittance procedures for cryptocurrency taxes and fines.
During an interview with BitKE’s David, KRA’s Omondi revealed that investors can self-declare their taxes, although exchanges make remittances easier.
Regarding digital service tax, Omondi stated that KRA did not have a mechanism to tax any non-resident income from Kenya before 2019. The law was revised as of July 1, 2021, to impose digital service tax only on non-residents. However, investors are responsible for declaring and remitting taxes on digital assets.
Omondi also confirmed that enforcement measures require exchanges that fail to remit within five working days to pay a 5% penalty on the outstanding tax. For unpaid taxes, there is also a monthly interest rate of 1%.
KRA is authorized to enforce Section 96 of the Tax Procedures Act, which allows it to collaborate with other government agencies to take further measures, such as banning exchanges from entering the Kenyan market. KRA can also enhance cooperation in tax collection with partner countries like the United Kingdom under existing frameworks.
The 2024 Finance Bill does not include digital asset taxes, except for the fluctuating penalties for unpaid taxes.
