The Kenya Revenue Authority (KRA) is set to introduce a real-time tax system that will integrate with cryptocurrency exchanges, a move that aims to monitor crypto transactions and ensure that taxes are collected effectively.
With an estimated four million crypto users, Kenya has one of the highest rates of crypto adoption in Africa.
The KRA noted it recognizes the significant potential revenue stream from the crypto market and has identified crypto transactions valued at approximately $18.6 billion in 2022.
“The new system will track and record transaction details, including date, time, type, and value to enable the KRA to capture information from cryptocurrency exchanges and marketplaces,” KRA stated as part of its tax collection strategies for the fiscal year 2024/25.
While the crypto sector in Kenya remains largely unregulated, it has gained popularity with exchanges like Binance and Coinbase, the report state.
According to the report, many users engage in peer-to-peer (P2P) transactions to avoid regulatory scrutiny, whereas the KRA’s outdated system has hindered its ability to track and tax these transactions, resulting in a significant loss of revenue.
The agency plans to tax earnings from crypto transactions under Section 3 of Kenya’s Income Tax Act with a goal to establish a robust system that ensures efficient tax collection on cryptocurrency transactions.
Chainalysis, a blockchain analytics firm, reported that Kenyans use crypto primarily for savings, commercial purposes, and remittances.
The legal status of crypto exchanges in Kenya remains uncertain, which could pose challenges for the KRA’s integration efforts. An amendment to the Capital Markets Act, currently under consideration in the National Assembly, proposes a capital gains tax on exchanges and an excise duty on transactions.
The crypto market’s volatility has attracted young traders seeking quick returns. Despite warnings from regulators, the low transaction fees, faster transfers, and widespread internet access have contributed to the high adoption rate.
