Government To Start Taxing Cryptocurrency Exchanges
The government of Kenya is planning to tax cryptocurrency exchanges for commissions they receive from the over four million people dealing in digital currencies in the country if fresh regulations are adopted.
The new regulations guiding the payment of the digital service tax require platforms that facilitate the buying and selling of cryptocurrencies and other digital assets to pay a 1.5 percent duty.
“For the purposes of these Regulations, 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,” say the Value added Tax (Electronic, Internet and Digital Marketplace Supply) Regulations, 2023 published by Treasury Cabinet Secretary Njuguna Ndung’u.
As of January 2021, Kenya introduced a digital service tax of 1.5 percent, which authorities claim has already contributed to the reduction of tax evasion by certain multinational corporations.
This tax is imposed on foreign enterprises that are not registered in Kenya but provide services to Kenyan customers via a digital platform.
A total of 4.25 million people in Kenya own cryptocurrency according to new data from The United Nations Conference on Trade and Development (UNCTAD).
Kenya is placed ahead of developed economies such as the United States, which is ranked sixth with 8.3 percent of its population owning digital currencies.
UNCTAD linked Kenya’s rising adoption of digital currencies to low fees charged by crypto exchanges, speed in sending remittances and Internet access.
About 12.4 per cent of Kenyans aged between 16 and 64 own some form of crypto with a majority of traders being male, according to the Meltwater report.
The crypto market, known for its wild price swings, has shed more than half of its value since November last year as investors pulled out money from riskier assets amid worries over soaring inflation and rising interest rates.