As a seasoned crypto investor with roots deeply entrenched in the Kenyan digital asset landscape, I find the recent developments by Kenya Revenue Authority (KRA) both intriguing and somewhat daunting. Having navigated the murky waters of unregulated cryptocurrency transactions for years, it’s refreshing to see a proactive approach from our regulators.
Kenya’s Revenue Authority (KRA) revealed their intention to modernize their outdated system, which is a crucial aspect of their tax system overhaul. This upgrade will be driven by cutting-edge technologies, allowing for immediate tracking of cryptocurrency transactions as a means to combat tax evasion and promote a more open and transparent organization.
KRA To Track Crypto Transactions In Real-Time
On Tuesday, it was announced by local news sources that Kenya’s tax authority revealed its intention to monitor and impose taxes on cryptocurrency transactions within the nation using a newly developed system. In a document detailing their strategies for tax collection during the 2024/2025 fiscal year, the KRA disclosed that the updated system will link exchanges and trading platforms to collect transaction data.
The system will link up with various cryptocurrency trading platforms and markets to monitor and log all cryptocurrency transactions. It will gather information on the specifics of each transaction such as when it happened, its type, and its worth.
This action is linked to the nation’s tax overhaul efforts, designed to broaden the tax base and combat tax fraud. The Kenya Revenue Authority (KRA) has pointed out that the existing system, considered outdated, has hindered the tracking and taxation of digital asset transactions, leading to substantial government revenue loss.
Recently, Kenyan authorities unveiled their strategy to employ artificial intelligence (AI) and machine learning tech for the purpose of identifying tax evasion. Their goal is to enhance revenue collection by making it more precise, streamlined, and in line with regulations.
Additionally, the Key Result Area (KRA) referred to Section 3 of Kenya’s Income Tax Act, under which digital asset earnings can be taxed. They stated their intention as follows: “The aim is to establish a strong and streamlined system that will facilitate KRA in collecting taxes on cryptocurrency in an effective and efficient manner.
Furthermore, they emphasized the growing significance of establishing a mechanism to monitor and gather taxes from these transactions, given the rapid expansion and possible impact of the sector on regulators, as per their statement.
In 2022, it’s been estimated that approximately four million individuals within the country engage in cryptocurrency usage, and these transactions were worth roughly $18.6 billion, according to regulatory observations.
Kenyan Regulatory Framework
In Kenya, the rapidly growing crypto sector operates largely without government oversight, given its increasing appeal. On a recent Tuesday conversation with BitKE, Nickson Omondi, who manages the Digital Economy Tax office at KRA, delved into the latest advancements regarding taxation of digital assets in the country.
As a research analyst, I’ve observed that the nation has implemented legislation pertaining to the taxation of digital assets. Remarkably, these regulations have been primarily targeted towards non-residents, encompassing entities and multinational corporations that lack physical presence within our borders yet provide their services here.
By September 2023, changes were made in the tax regulations, targeting individuals involved in cryptocurrency transactions. Previously, it was uncertain for digital asset users if they were required to pay taxes on their income generated through such transactions, a point emphasized by Omondi.
Despite this, crypto trading platforms must keep 3% of each digital transaction and forward it to the Kenyan authorities, as the Digital Economy Tax Manager clarified. Omondi underlined that the law has consistently demanded that users pay taxes on their digital assets.
In conclusion, he mentioned that various Kenyan regulatory bodies are discussing digital asset regulations, which he views as a “positive development” for the industry.
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2024-10-16 11:12