Kenya is proposing new taxes to take advantage of the growing digital economy in a bid to boost domestic revenue and reduce its fiscal deficit in response to the current cash crunch.
The East African country plans to charge a 3% tax on the transfer or exchange value of digital assets, while content creators will pay 15% on online earnings vs. 5% withholding tax on rent. If the finance bill proposals are ratified, the taxes will take effect in the next budget year, which begins July 1.
crypto
Cryptocurrency exchanges like Binance or Yellow Card or people who facilitate the exchange or transfer of digital assets are expected to withhold tax deductions and remit them to the country’s tax authority within 24 hours. However, exchanges must first register with the tax authority in order to remit such deductions.
Kenya defines digital assets as “anything of value other than tangible and cryptocurrency, token code, number held in digital form and generated through cryptographic means or otherwise, by any name called, that provides a digital representation of the exchanged value with or without consideration that can be transferred, stored or exchanged electronically; and a non-fungible token (NFT) or any other token of a similar nature, whatever its name.
Currently, the Kenyan government does not recognize cryptocurrencies as legal tender and in the past severely warned that are unregulated and highly speculative and volatile, putting them in a great risk to lose value. The government has also variously claimed that it cannot offer any protection should crypto exchanges go bust, as seen recently with FTX.
However, in recent months, Kenya has softened its stance on cryptocurrencies and has proposed working on a legal framework for crypto assetsas it moves to take advantage of the growing adoption of cryptocurrencies.
Kenya currently leads the world in peer-to-peer transactions involving cryptocurrencies. It is also the top country in Africa for cryptocurrency adoption, followed by Nigeria, according to the 2021 Chainalysis report.
content creators
With respect to content creators, the new bill imposes a tax on profits earned by a brand-sponsored content creator to create content or run promotions, and income from affiliate marketing.
It defines content creators as those who offer “entertainment, social, literal, artistic, educational or any other material in electronic form”, through websites, social media platforms such as Facebook, Twitter or Instagram, in association with brands or retailers.
Profits made by offering “subscription services in which the audience pays a periodic fee to access the content and support the creator of the content, or merchandise sales in which physical goods and services are sold with a logo, brand name, or a slogan to the audience of the creator of the content, eBooks, courses or software”, will also be taxed.
Nor is revenue spared from “membership programs for exclusive content, including early access, licensing of content, including photography, music, or other businesses or individuals for use in the user’s own projects; or crowdfunding to raise funds for specific goals for a content creator or another person.”
Crypto Influencers In The Crosshairs Of Kenya’s New Tax Offer by Annie Njanja originally posted on TechCrunch
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