Kenya has proposed new taxes on the digital economy in an effort to increase domestic revenues and reduce the country’s budget deficit.
The government of this East African nation has proposed taxing the sale or purchase of digital assets at a rate of 3 percent, while increasing the withholding income tax rate for online income from 5 percent to 15 percent.
If the tax increases included in the financial plan are approved, the next fiscal year will begin on July 1.
Read also: Nigeria’s SEC to regulate digital assets, but not crypto
RelatedPosts
Tax on Crypto
The tax deductions should be withheld by cryptocurrency exchanges like Binance or Yellow Card or those supporting the trade or transfer of digital assets and sent to the country’s tax administration within 24 hours. However, before any such deductions may be remitted, the exchanges must first register with the tax office.
Kenya defines digital assets as “anything of value that is not tangible and cryptocurrencies, token code, the 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; and a non-fungible token (NFTs) or any other token of similar nature, by whatever name called.”
For the time being, however, it seems as though the Kenyan government is sticking to its guns and refusing to acknowledge that the cryptocurrency known as Bitcoin is a legitimate form of payment. The government has also made contradictory statements about its inability to provide protection in the event that cryptocurrency exchanges fail, as was shown most recently with FTX.
To capitalise on the rising cryptocurrency acceptance, Kenya has recently modified its attitude on crypto by proposing to work on a legal framework for crypto assets.
In terms of cryptocurrency P2P transactions, Kenya is now the world leader. According to the 2021 Chainalysis research, it also has the highest rate of cryptocurrency usage in Africa, ahead of even Nigeria.
South African crypto investment bundle from Luno tracks digital asset indices
Content Creators
The new law targets content creators by taxing their affiliate marketing revenues and any money they generate from being sponsored by a brand to create content or run promotions.
Content creators are defined as individuals who provide “any other material electronically,” including but not limited to “entertainment, social, literal, artistic, educational, or any other material,” via websites or social media sites like Facebook, Twitter, or Instagram in conjunction with advertisers or businesses.
Earnings from “subscription services where the audience pays a periodic fee to access the content and support the content creator,” “merchandise sales where physical goods and services are sold featuring the logo, brand, or catchphrase of the content creator,” “eBooks, courses, or software,” are all taxable.
Other sources of income that are not exempt include “membership programmes for exclusive content including early access, licencing the content including photographs, music, or other businesses or individuals for use in the user’s own projects; or crowdfunding for raising funds for specific goals for a content creator or another person.”