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Kenya Considers Tax on Crypto, NFT Transfers and Online Influencers

According to a recently filed bill, Kenyan MPs are proposing imposing a 3% tax on cryptocurrencies and nonfungible token transfers and a 15% tax on commercialized internet content.

The Finance Bill 2023, which was introduced to Kenya’s parliament on May 4, would establish a digital asset tax on “income derived from the transfer or exchange of digital assets,” as well as particular wording for NFTs.

The measure will go through five rounds of readings, committees, and reports in the National Assembly before being given to the president for final approval. Crypto exchanges or anyone that start crypto or NFT transactions would be obliged to collect the tax, deducting 3% of the transfer value to be paid to the government. Exchanges that are not registered in Kenya would be required to register under the tax system.

The measure also proposes a tax on “digital content monetization,” levying a 15% tax on content producers paid to promote and sell items and services online, such as sponsorships, affiliate marketing, merchandise sales, and paid subscriptions.

The bill’s clause on digital assets has received varied reactions online. Some people were relieved to learn that crypto and NFTs were now officially recognized in the country. Previously, the Central Bank of Kenya issued warnings against using cryptocurrency, but no outright prohibitions were imposed.

On May 4, Kenyan research and markets analyst Rufas Kamau tweeted that the 3% tax was “a joke” and jokingly inquired whether it applied to “supermarket and credit card loyalty points.”

Cryptocurrency Kenya, a Kenyan crypto advocacy organization, stated that such a digital tax “must apply to […] everything digital,” adding that a crypto-only tax is “targeted harassment.”

It also noted that the tax was greater when compared to exchange costs, comparing the planned 3% tax to Binance’s 0.10% trading fee.

Kenya took its first attempt to regulate cryptocurrency in November, amending its capital market regulations to require anyone who hold or trade in cryptocurrency to provide information on their actions to the authorities.

Kenya now makes it into the top 20 nations for crypto usage. According to a September survey from blockchain analytics company Chainalysis, the nation ranks 19th in terms of cryptocurrency usage.

 

Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Crypto is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Crypto market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.