Kenya Revenue Authority KRA proposes realtime tax monitoring for cryptocurrencies

CoinDesk report:
Nickson Omondi, Manager of the KRA Digital Economy Tax Office, stated that the tax agency plans to launch a real-time tax collection system that will be integrated into exchanges. Through this initiative, the KRA aims to expand Kenya’s tax base and enter the growing industry, which reported approximately $18.6 billion in cryptocurrency transactions in 2022.
The KRA emphasized its tax plans for the 2024/25 fiscal year, confirming that the new system will monitor and track transaction details such as type, date, value, and time. Despite the lack of clear regulatory provisions from the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA), exchanges such as Coinbase and Binance continue to serve the Kenyan cryptocurrency market.
The KRA acknowledges that the outdated system is ineffective in monitoring cryptocurrency taxation.
Tax officials revealed that the Kenya Revenue Authority (KRA) will integrate a new tax system with cryptocurrency exchanges and markets to track and record all transactions in real-time.
This is part of a strategy to capture tax evaders in a largely secretive segment of the market…
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– Business Daily (@BD_Africa)
October 16, 2024
According to afcacia.io, the uncertain legal framework of Kenyan exchanges has hindered the KRA’s efforts to integrate the tax system into cryptocurrency exchange platforms.
Omondi of the KRA confirmed that the digital service tax and value-added tax were introduced in 2021. These two taxes specifically apply to non-residents, entities, or multinational corporations that provide services to Kenyan consumers without a physical presence in Kenya. They allow the government to tax individuals or entities that profit from the Kenyan digital market.
On September 1, 2023, the law changed to include cryptocurrency investors. Prior to this, it needed clarification on whether cryptocurrency investors should pay capital gains tax, turnover tax, or withholding tax. According to the 2023 Finance Act, the existing tax regime came into effect on September 1, requiring exchanges to remit 3% to the Kenyan government through the KRA’s new system. This law also applies to all forms of digital assets, including NFTs.
When asked about how exchanges can remit the 3% tax, Omondi stated that while some exchanges are complying with the regulations, the matter is still under discussion. He said the Central Bank of Kenya has advised Kenyan banks not to directly engage with cryptocurrency exchanges, although it has not been declared illegal. He added that precedents worldwide recognize all taxes as legal, including taxes imposed on illegal activities.
The KRA outlined the declaration and remittance procedures for cryptocurrency taxes and fines.
In an interview with David from BitKE, Omondi of the KRA
disclosed
that investors can self-declare taxes, although exchanges make remittances easier.
Regarding the digital service tax, Omondi stated that the KRA did not have a mechanism to tax any non-resident income from Kenya prior to 2019. The law was revised as of July 1, 2021, to only tax non-residents for digital services. However, investors are responsible for declaring and remitting taxes on digital assets.
Omondi also confirmed that there are enforcement measures requiring exchanges that fail to remit within five working days to pay a 5% penalty on the outstanding tax. For unpaid taxes, there is also a 1% interest per month.
The KRA is authorized to enforce Section 96 of the Tax Procedures Act, which allows it to collaborate with other government agencies to take further measures, such as banning exchanges from entering the Kenyan market. The KRA can also enhance cooperation in tax collection with partner countries such as the United Kingdom under existing frameworks.
The 2024 Finance Bill does not address digital asset taxes, except for the uncertainty surrounding penalties for unpaid taxes.