Kenya to Tax Digital Assets, NFTs in Proposed Bill
Owners of digital assets and non-fungible tokens (NFTs) in Kenya will have to pay a 3% tax on all transfers under the proposed 2023 Finance Bill.
Kenya has emerged as one of the global leaders in the adoption of digital assets. The United Nations estimates that 4.25 million Kenyans (8% of the population) own digital assets, while Chainalysis ranks it among the top 20 countries for adoption.
The East African country wants to take advantage of this growing mass of Bitcoin users to shore up the deficit. Under the new bill, Kenyan owners of digital assets will have to pay a 3% tax on the transfer or exchange value of a digital asset.
From the Finance Act 2023 for the crypto people:
“Notwithstanding any other provision of this Act, a tax called digital wealth tax shall be paid by a person on income derived from the transfer or exchange of digital assets.” pic.twitter.com/v0PeQjSLO5
— Mwango Capital (@MwangoCapital) 4 May 2023
The bill defines a digital asset as “anything of value that is not tangible and cryptocurrencies, token code, numbers held in digital form and generated through cryptographic means or otherwise … provides a digital representation of exchange of value with or without consideration that can transmitted, stored or exchanged electronically.”
A digital asset can also mean “a non-fungible token or other token of a similar nature.”
This is not Kenya’s first attempt to tax digital assets. Last November, lawmakers proposed the Capital Markets (Amendment) Act 2022, which imposed taxes on exchanges, wallets and traders. It required Kenyans to pay capital gains tax on assets held longer than 12 months and income tax on assets held for a shorter time.
The reception has been mixed. Some believe that taxation will legitimize crypto in East Africa’s largest economy. Despite being a global leader in adoption, Kenya still lacks basic digital asset regulations. Most banks in the country shun the industry and refuse to offer services to digital asset companies or traders.
However, others argue that the tax is exploitative.
“If the government is serious about digital taxes, then the law must apply to everyone. Anything digital … Anything less than that is targeted harassment, local advocacy group Cryptocurrency Kenya said.
See: Discussion: How NFTs are bridging the cross-platform gap
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