Kenya is set to propose a 3% tax on the transfer of digital currencies in its upcoming budget. The National Treasury, Kenya’s Finance Ministry, proposed the tax, which would impact the transfer of digital assets but will not confer legitimacy on the space. This move follows Kenya’s consideration of a bill last year that would allow for taxation of exchanges, transactions, and digital wallets. Although it is yet to legitimize the space, the African nation has recorded 4.25 million residents who own digital currencies, which accounts for 8.5% of the population. Notably, this places Kenya as the fifth nation globally in crypto adoption, according to a report by the United Nations.
The Finance Bill 2023, which will be presented on June 8, defines the term “digital asset.” As per the definitions in the bill, “digital assets” include anything of value that is not tangible and digital currencies held in digital form and generated through cryptographic means or otherwise, including a non-fungible token or any other transactional token of the same nature. Additionally, income derived from the exchange or transfer of digital assets is described as the gross fair market value consideration received or receivable at the point of exchange or transfer.
It is notable that Kenya’s cryptocurrency regulations were not enacted until after the country’s 2022 presidential elections. The newly elected president William Ruto was regarded as more crypto-positive than his rival Raila Odinga. If the 3% tax on digital asset transfers is approved, it will be the first tax of its kind in Kenya, and this tax may signal a change in how the digital currency space is perceived.
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