Kenya announced it would levy a 1.5% tax on all commissions foreign crypto companies earn from their clients, according to an April 25 Business Daily Africa report.
The new regulations include all foreign crypto exchanges earning interest by facilitating digital asset buying and selling transactions in Kenya, the Business Daily Africa article said.
Commissions from over 4 million users
The new regulations expanded the existing 1.5% digital tax service that the country enforced on January 1, 2021. This tax was reserved for foreign companies that were not registered in Kenya but offered digital services to Kenyans.
The VAT rules mentioned the new extension by stating:
“For the purposes of these Regulations [digital tax service]includes a taxable offering on any electronic, internet or digital marketplace… facilitating online payment for, exchange or transfer of digital assets, excluding services exempt by law.”
The regulation defines digital assets as anything that provides value and is created and stored digitally. This definition includes cryptocurrencies, NFTs and other forms of digital assets such as “data, images, video and written content”.
This definition of digital assets and the new expansion of the digital tax office covers the commission fees generated by foreign crypto companies in the region from over 4 million users. Leading crypto exchanges such as Binance, Coinbase and Kraken are also subject to the new regulations.
Kenya on crypto
According to Triple-A data, 10.71% of Kenyans own cryptocurrencies by the end of 2022. This percentage equates to more than 6.1 million individuals, making Kenya one of the largest crypto markets on the African continent. On a global scale, Kenya is ranked as the 19th country with the most significant crypto adoption in Chainalysis’s 2022 Crypto Adoption report.
In addition to a lot of attention for crypto as an investment tool, Kenya is also active in crypto mining. In early 2022, the country declared that it welcomes Bitcoin (BTC) mining companies to set up shops in Kenya to use excess geothermal energy for mining.
In addition to international companies, local citizens have also invested in mining activities. In December 2022, a rural village went viral about its mining activities and how it used the off-grid energy generated by mining to power its village.
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