Kenya’s Finance Ministry, the National Treasury, is set to introduce the national budget for the coming budget year on June 8th. The proposals presented to lawmakers include a 3% tax on income from crypto transactions and non-fungible token (NFT) sales.
Efforts to Regulate Crypto
Kenya has been working towards clearer crypto regulations to legitimise the industry. In 2022, lawmakers proposed a bill that would allow for the taxation of crypto exchanges, digital wallets, and transactions. This move is critical for the country where roughly 8.5% of the population owns cryptocurrencies. According to a UN report, this ranks the Kenyan nation fifth in global adoption of crypto.
Criticism of Tax Percentage
The newest proposal has faced criticism regarding the high tax percentage and inequality of fiscal treatment towards crypto compared to other digital assets.
Monetized Online Content Tax
Apart from crypto and NFT taxation, the budget proposes a 15% tax on monetized online content. The tax would apply to content creators paid to promote and advertise products and services online, including sponsorships, affiliate marketing, merchandise sales, and paid subscriptions.
Crypto Exchange Taxation
For taxation purposes, crypto exchanges not registered in Kenya would have to register under the tax regime.
The Proposal Process
The proposal has not yet achieved legally obliging status. The bill will first undergo five rounds of readings, committees, and reports by the National Assembly. If passed, it will be transferred to the president for final assent into law.
African Countries Move Towards Crypto Regulation
Kenya is not the only African country aiming to include crypto in the official monetary and taxation systems. The Bank of Zambia is also working on crypto regulation. Cryptocurrencies are gaining importance in emerging economies as a means to improve financial inclusion and facilitate remittances, being one of the main sources of income for many households.
Kenya’s new proposal for crypto taxation is just one example of the growing trend towards the legitimization of cryptocurrencies in African countries. If passed, this proposal could be a significant step forward for Kenya’s crypto industry. However, there are concerns about the high tax percentage and the need for fair fiscal treatment of all digital assets. The budget’s proposed 15% tax on monetized online content may also affect content creators who rely on online advertising as a source of income. As crypto regulation continues to evolve in Kenya and other African countries, it remains to be seen how these policies will impact the growth of the industry in the region.