Kenya began to charge a tax of 3% for the transfer and exchange of cryptocurrencies

According to the ruling party, this will replenish the state treasury, reducing the country’s dependence on expensive foreign loans from China, the International Monetary Fund (IMF) and the World Bank. The new taxation went into effect on 1 July. It includes a 1.5% housing tax, a double fuel surcharge up to 16%, a 5% withholding tax for digital content creators, and a 3% digital asset tax on the value of the transferred or exchanged crypto asset.

Platform owners must pay this tax, and in the case of offshore platforms, they will have 24 hours to transfer funds to the Kenya Inland Revenue. Local cryptocurrency traders are concerned that this tax is too high for them as they make little profit. Industry participants believe that for a start, the government should inform the owners of crypto assets about this tax and how it should be transferred.

For example, the Blockchain Association of Kenya (BAK) called the new law too vague. The association believes that tax authorities should treat non-fungible tokens (NFTs), equity tokens, stablecoins and utility tokens differently.

“Taxing all digital assets “one size fits all” can stifle innovation. Taxes need to be introduced depending on the use cases of each crypto asset, ”said BAK.

The association noted that the new tax does not take into account loss-making transactions or transfers with zero profit, when users can simply move crypto assets between their wallets. The high volatility of digital assets means that not all trades are profitable. Ignoring this aspect can lead to unfair taxation of traders and greatly slow down the development of the industry in the country, BAK noted.

Recall that in April, a bill was submitted to the Parliament of Kenya, according to which cryptocurrencies should be regulated as securities.