Last updated on May 6th, 2023 at 05:36 pm
The Kenyan Government has proposed new taxation measures to boost the country’s domestic revenues and reduce its fiscal deficit amidst a persisting financial crunch.
The African country is targeting its digital economy with this proposed tax regime. The new regulation is expected to boost transparency and tax collection on cryptocurrency transactions.
Under the proposed plan, a 3% tax would be levied on the transfer or exchange of digital assets, while content creators operating within the digital space would see their tax on online earnings increase from 5% withholding income tax to 15%. If ratified, these taxes will be implemented during the upcoming budget year, which begins on July 1, 2023, and will be included in the finance bill.
According to TechCrunch, crypto exchanges, such as Binance and Yellow Card, as well as individuals involved in facilitating the exchange or transfer of digital assets, will be required to withhold tax deductions and remit them to the country’s tax authority within 24 hours. However, the exchanges must first register with the tax authority to be licensed to remit such deductions.
This move will take advantage of the increasing popularity of digital assets in the country and the need to regulate the trade of these assets. According to a 2022 Chainalysis report, Kenya is ranked second in Africa in terms of crypto adoption and fifth globally in terms of peer-to-peer (P2P) exchange trade volume.
Despite the increasing interest and adoption of digital assets by businesses and individuals in the nation, the government’s stance on virtual currencies remains unchanged. Kenyan authorities have previously issued warnings that cryptocurrency does not qualify as legal tender within the country. These warnings highlighted cryptocurrencies’ speculative and unregulated nature and cautioned against their volatility and the potential for a substantial loss.
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