Last updated on November 4th, 2024 at 05:16 am
Kenya has imposed a tax of 1.5% on foreign crypto exchange companies in the country. The East African country is looking to capitalize from the over 4 million people who trade digital assets in the country.
According to a report from Business Daily Africa dated April 23, 2023, Kenya announced that it would impose a tax fee on all commissions earned by foreign crypto companies from their customers.
The purpose of this move is to stop foreign companies from evading taxes. Also, it is part of a larger scheme to tax the crypto industry to protect its customers from the volatility of the crypto market.
This development is targeted toward foreign businesses that are not registered in the country but provide digital services to Kenyans. The VAT (value-added tax) regulations were explained in a statement saying:
“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.”
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In the regulations, digital assets are defined as anything that is created and stored digitally and also provides value. This definition encompasses cryptocurrencies, Non-fungible tokens, images, videos, and even written content.
There are thin regulations for cryptocurrencies in Kenya, so it might be difficult to state how much digital asset is held by Kenyan investors. Crypto exchange giants like Coinbase, Binance, and Kraken all fall under this new regulation.
State of Crypto in Kenya
Kenya has also shown to be a welcoming environment for the crypto sector. Reports from Triple-A show that at the end of 2022, over 10.71% of Kenyans own digital assets. This translates to over 6 million individuals.
This data places it among the top three largest crypto markets in Africa. They stand alongside other crypto giants such as Nigeria and South Africa. Furthermore, a Chainalysis report shows that the country is ranked #19 on a global cryptocurrency adoption index just before Indonesia.
Moreover, at the beginning of 2022, Kenya invited crypto-mining companies to come and establish a presence and mine using surplus “geothermal power.” In December of the same year, a village in Kenya took the internet by storm for mining Bitcoin and also how they make use of the energy generated from mining to power the village.
