Kenya has announced that it will impose a 1.5% tax on all commissions earned by foreign crypto companies from their customers. The new regulations include all foreign crypto exchanges that earn interest from facilitating buying and selling transactions of digital assets in Kenya. This new tax service expands the existing 1.5% digital tax service that the country enforced on Jan. 1, 2021.
Definition of Digital Assets
The regulations define digital assets as anything that provides value and is created and stored digitally. This definition includes cryptocurrencies, NFTs, and other forms of digital assets like “data, images, video, and written content.”
Coverage of the New Expansion
This definition of digital assets and the new expansion of the digital tax service covers the commission fees foreign crypto companies in the region generate from over 4 million users. Leading crypto exchanges like Binance, Coinbase, and Kraken also fall under the new regulations.
Crypto Adoption in Kenya
As of the end of 2022, 10.71% of Kenyans own cryptocurrencies, according to data from Triple-A. This percentage equates to over 6.1 million individuals, which places Kenya as one of the biggest crypto markets in the African continent. In addition to paying close attention to crypto as an investment tool, Kenya is also active in crypto mining as well. At the beginning of 2022, the country declared that it is welcoming Bitcoin (BTC) mining companies to set up shops in Kenya to use excess geothermal power to mine. Local citizens have also been investing in mining operations. In December 2022, a rural village went viral with its mining operations and how utilized the off-grid energy generated by mining to power its village.
The value-added tax regulations have mentioned the new expansion, and it stated that “For the purposes of these Regulations [digital tax service], a taxable electronic, Internet or digital marketplace supply include…facilitation of online payment for, exchange or transfer of digital assets excluding services exempted under the Act.” The government’s move comes as it looks to increase its revenue from the growing crypto market.