(Kitco News) – As Kenya explores ways to shore up its finances and increase government revenue, lawmakers in the country are looking to tax cryptocurrency and nonfungible token (NFT) transactions as a potential source of income according to a newly introduced bill to the Kenyan parliament.
Received by the national assembly on May 4, the Finance Bill 2023 is looking to amend the Income Tax Act by inserting a section that establishes “a tax to be known as digital asset tax” that “shall be payable by a person on income derived from the transfer or exchange of digital assets.”
Based on the text of the bill, the owner of the platform or the person who facilitates any exchange or transfer of a digital asset will be responsible for collecting the appropriate tax and submitting it to the Commissioner.
“A person who is required to deduct the digital asset tax shall, within twenty-four hours after making the deduction, remit the amount so deducted to the Commissioner together with a return of the amount of the payment, the amount of tax deducted, and other such information the Commissioner may require,” the bill reads. “The rate of tax in respect of digital asset tax shall be three percent of the transfer or exchange value of the digital asset.”
Non-residents who own a platform on which Kenyans conduct digital asset exchanges will be required to “register under the simplified tax regime.”
A digital asset is defined as anything of value that is not tangible, including “cryptocurrencies, token code, number held in digital form and generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value exchanged with or without consideration that can be transferred, stored or exchanged electronically.”
The definition also included non-fungible tokens (NFTs), “or any other token of a similar nature.”
The income derived from the transfer or exchange of a digital asset will be determined by “the gross fair market value consideration received or receivable at the point of exchange or transfer of a digital asset.”
Highlighting the changing landscape of the global employment market, the bill also looks to impose a tax on “digital content monetization,” applying a 15% tax on content creators who are paid to promote various products and services online. This includes activities such as sponsorships, affiliate marketing, paid subscriptions, licensing content, crowdfunding and merchandise sales.
The bill is set to undergo five rounds of readings, committees and reports by the National Assembly before coming up for a final vote. If passed, it will then go to the president to be signed into law.
According to a September report from Chainalysis that looked at global crypto adoption, Kenya ranks 19th in the world in the overall index ranking, indicating that the country has one of the more active blockchain communities. A report presented at the United Nations Conference on Trade and Development in August indicates that 8.5% of Kenya’s population owns crypto, making it the fifth-ranked country globally behind Ukraine, Russia, Venezuela and Singapore.
Last November, the government of Kenya made its first effort to regulate the country’s growing cryptocurrency industry by introducing amendments to its capital market laws requiring those who own or deal in crypto to report information on their activities to the authorities.
Source: Kitco News