Amidst the global crypto market downturn, Kenya wants to regulate and also tax its crypto industry.
Cryptocurrency traders in Kenya will be required to pay taxes if the country passes the Capital Markets (Amendment) Bill 2022, which aims to regulate digital currency trade.
"Where the digital currency is held for a period not exceeding twelve months, the laws relating to income tax shall apply or for a period exceeding twelve months, the laws relating to capital gains tax shall apply,” the Bill, sponsored by Mosop's MP Abraham Kirwa, states.
The Bill requires that individuals who own or deal in digital currency provide the Capital Markets Authority (CMA) with specific information for tax purposes—if amended the Bill will introduce a 20% excise tax on every crypto transaction fee.
Those owning or dealing in digital currency will be required to furnish the regulator with information regarding the amount of the virtual currency in Kenya shillings.
They will also be required to inform the CMA of the type of virtual currency transacted in, the date on which the virtual currency was acquired and the date on which the virtual currency was sold.
According to the Bill, "a person who possesses or deals in digital currency shall provide the Authority with the following information for tax purposes—the number of proceeds from the transaction, any costs related to the transaction and the amount of any gain or loss on the transaction."
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In July 2022, a report by United Nations Conference on Trade and Development (UNCTAD) revealed that 8.5% of the Kenyan population (i.e: 4.25 million people) own cryptocurrencies. UNCTAD asked Kenya and other nations to regulate and tax the crypto industry, in order to limit exposure to the meltdown in the crypto market and the threats of financial instability.
This is not the first time that the Kenyan government is moving to regulate the crypto industry. In 2020, Kenya Revenue Authority (KRA) announced a regulation that required users of digital marketplaces (including crypto platforms) to pay digital tax. At a rate of 1.5% on gross transaction value, the tax became effective on January 1, 2021.
Currently, Kenyan banks reportedly charge an excise duty of 20% on all commissions and fees on crypto trades.
Editor's Note: This is a developing story...