The Kenya Revenue Authority (KRA) is set to introduce a new tax system that will monitor crypto transactions in real time to maximize and perfect their tax program.
The KRA seeks to deepen its pool of tax revenue by turning its attention to crypto users in the East African country.
Kenya has over 4 million crypto users one of the highest in Africa hence present revenue opportunities for the KRA.
The KRA revealed that crypto transactions in 2022 were valued at around $18.6 billion (KES 2.4 trillion) which could be higher than the transaction volume handled by some commercial banks.
The system shall integrate with cryptocurrency exchanges and marketplaces to track and record cryptocurrency transactions. It shall capture transaction details, including transaction date, time, type, and value,” KRA said in a document revealing their tax collection strategies for the financial year 2024/25.
The Crypto industry is still largely unregulated by Kenyan Regulatory Authorities.
Kenyan regulatory authorities like the Capital Markets Authority (CMA) and the Central Bank of Kenya (CBK) have done very little to regulate the industry in the country despite its growing popularity.
Crypto exchanges like Binance and coinbase are very popular in the east african country doing large volumes of trade on a daily basis.
P2P is very popular in the country as most crypto buyers and sellers use it to transact and accept payments via Mobile money to bypass regulators.
The KRA stated that its agency has been unsuccessful in tracking and taxing transactions due to an outdated system which has resulted in significant losses of revenue for the government.
The agency said earnings from crypto transactions can be taxed as per section 3 of Kenya’s Income Tax Act.
“The goal is to have a robust and efficient system that will enable KRA to collect taxes on cryptocurrency effectively and efficiently,” KRA said.
The crypto industry is quite popular among the youth in the country who are attracted to the promise of reaping very high ROI by leveraging the volatility of crypto assets.
Despite warnings from the regulatory bodies in Kenya on the dangers of investing in crypto asset class the number of crypto users continue to grow.
A Chainalysis report claimed that most Kenyans with crypto holdings buy them to preserve savings and when used commercially is for buying and selling of goods or international remittances.
“With this potential, it has become increasingly important for the KRA to develop a system to track and collect taxes on cryptocurrency transactions,” KRA said.
What to Know
In Kenya, it is still unclear what the legal status of Cryptocurrencies is. This might pose challenges for the KRA as it seeks to widen its Tax net around the crypto industry.
Kenya is one of the top 5 countries by Crypto adoption in Africa.