The Kenyan government has proposed a new tax on digital assets, such as cryptocurrencies and non-fungible tokens, in its Finance Bill 2023. The bill seeks to amend the Income Tax Act by inserting a new section 12F that will introduce a digital asset tax.
According to the bill, the digital asset tax will be payable by any person who derives income from the transfer or exchange of digital assets. The tax rate will be three percent of the gross fair market value consideration received or receivable at the point of exchange or transfer of a digital asset.
The bill defines a digital asset as anything of value that is not tangible and 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. It also includes a non-fungible token or any other token of similar nature, by whatever name called.
The bill further stipulates that the owner of a platform or the person who facilitates the exchange or transfer of a digital asset shall deduct the digital asset tax and remit it to the Commissioner within 24 hours after making the deduction.
A non-resident person who owns a platform on which digital assets are exchanged or transferred shall register under the simplified tax regime.
The proposed tax is part of the government’s efforts to widen its tax base and capture revenue from the growing digital economy. Kenya already has a digital service tax (DST) that applies to resident and non-resident entities who offer digital services within the scope of DST in Kenya at a rate of 1.5% of the gross transaction value. The DST came into effect on 1 January 2021 and is due by the twentieth day of each month.
The Finance Bill 2023 also proposes to tax digital content monetization by influencers and other online content creators. The bill defines an influencer as a person who commands a digital presence that influences the opinions or behaviours of a specific group of people.