Kenya is possibly looking at taxing cryptocurrency and non-fungible tokens (NFTs) transfers with lawmakers introducing a bill that would lead to a 3% tax on cryptocurrency and non-fungible token transfers, along with a 15% tax on all monetized online content which by default bring digital influencers in the loop.
As expected, this policy decision was met with mixed opinions on the internet. Kenya’s Finance Bill of 2023, introduced in the Parliament on May 4th, contained specific provisions with regards to the imposition of taxes on digital assets, which would be known as ‘Digital Asset Tax’, imposed on the income generated from the exchange and transfer of all digital assets, along with distinct provisions for NFT’s.
As is the procedure, the Bill has to live through five rounds of Parliamentary readings, various committees and reports, and if it passes all the necessary stages, it will proceed to the President for final assent. Various mechanisms have been tasked with the collection of the above-mentioned taxes like cryptocurrency exchanges or those who usher in the transfer of cryptocurrency and NFT’s. 3% of the value of such transactions will be paid to the Kenyan Government. This bill further instructs all the non-registered exchanges taking place in Kenya to register themselves under the brand new regime.
This rigorous tax regime also ventures into the world of content creation and aims to impose a 15% tax cap on content creators and influencers who provide paid partnership services and are involved in promotion and advertisement. This tax would house services such as sponsorships, merchandise sale, affiliate marketing, and many more listed in detail in the bill. This part of the Bill has received a mixed bag of responses across the internet, especially by the content creation community, which is directly impacted by it.
Some accepted it with open arms as tax imposition directly signifies the official recognition of Crypto and NFT’s in the country. This paves the way for de-stigmatization of any apprehension against digital currency, which was previously voiced by the Central Bank of Kenya, which cautioned the citizens against the use of crypto.
Some are still skeptical of the tax, deeming it as ‘a joke’ and sarcastically questioning whether the Government will further place a tax on supermarket and credit loyalty points. Others such as the Kenyan crypto Advocacy Group claimed the imposition of a 3% tax was equivalent to “targeted harassment”, adding that it targeted only cryptocurrency related transactions and did not cover all digital transactions. Arguments were also put forth regarding the high rate of taxes which were to be charged as it seemed astronomical when compared to the fees charged by exchanges like Binance’s 0.10% trading fee.
Despite being frequently overlooked in the global economy, the African continent is actively striving to establish itself as a key player in the world of cryptocurrency. Three notable countries namely Nigeria, Kenya and the Republic of Congo (CAR), have gained attention for their adoption of crypto – with CAR even recognizing bitcoin as an official legal tender. In light of hyperinflation and the dependence of many African countries on more stable foreign currencies, cryptocurrency has emerged as a viable alternative to mitigate the devaluation of their fiat currencies.