Kenya Expects to Earn $46 Million as New Tax Targeting Crypto Exchanges Comes Into Force

The Kenya Revenue Authority (KRA) expects to raise up to 5 billion Kenya shillings ($ 45.5 million) in the first half of 2020 with a new tax targeting cryptocurrency exchanges and other online services ) will earn, according to a senior KRA official.

The digital service tax (DST), first proposed in August 2020, came into effect on January 2 due to concerns about its implementation. The tax is levied at a rate of 1.5% on the gross transaction value for every crypto sale.

Both local and overseas digital asset exchanges operating in the country also pay the tax to the Kenyan government. Forex like the peer-to-peer platform Paxful and Binance have to pay the tax every month.

However, Kenyan crypto companies have the option to reclaim their daylight saving time at the end of each year as they are already subject to different local taxes.

According to Rispah Simiyu, commissioner of the domestic tax department at the Kenya Revenue Authority, the tax is an appropriate response to the growth of digital activity in the East African country, the continent’s third largest crypto-economy.

She predicted that summer time will generate $ 45.5 million in revenue for the Kenyan government in the first six months of this year, according to her recently published article for Business Daily, a local newspaper. Simiyu noted that the new tax is a “remarkable step for Kenya,” adding:

[The increasingly digital marketplace] is a promising platform for revenue generation and a realignment of tax collection mechanisms is urgently needed. It offers multinational corporations the opportunity to help grow the country where they earn their income. This will strengthen the moral business model for international trade in Kenya.

Kenya is the third largest Bitcoin market (BTC) in Africa after Nigeria and South Africa. On the Paxful P2P exchange alone, Kenyans have traded Bitcoin worth $ 55.3 million or 5,894.8 BTC in the past five years. The country is Paxful’s eighth largest market in the world, second only to Nigeria in Africa.

In the meantime, the new tax measures were received with mixed feelings from Kenya. Lawrence Mungai, tax expert at PWC Kenya, said the country intends to “bring under the tax network companies that operate in the digital economy and have little or no presence in market jurisdiction.”

However, he is not sure whether this goal will be achieved “given the different models adopted by players in the digital economy around the world”. A local TV station reported that digital economy actors had warned that the “new tax could affect the growth of the emerging sector”. It was said that traders asked for more time to grow.

What do you think of the new tax on digital services in Kenya? Let us know in the comments below.

Photo credit: Shutterstock, Pixabay, Wiki Commons

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