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Home Economy

KRA to roll out real-time tax system for cryptocurrency

Teresiah Ngio by Teresiah Ngio
October 17, 2024
in Economy
Reading Time: 2 mins read

The Kenya Revenue Authority (KRA) has announced plans to roll out a real-time tax system that will integrate with cryptocurrency exchanges and marketplaces. This initiative is part of the agency’s strategy to enhance tax collection for the fiscal year 2024/25. The new system aims to monitor and record cryptocurrency transactions more effectively, capturing key details such as the date, time, type, and value of each transaction.

KRA noted that the current tax system has struggled to keep up with the fast-evolving cryptocurrency sector, resulting in significant revenue losses for the government. The tax authority estimates that Kenya’s cryptocurrency market facilitated transactions worth approximately KES 2.4 trillion between 2021 and 2022, representing nearly a fifth of the country’s Gross Domestic Product (GDP).

“The lack of a robust system for tracking and taxing cryptocurrency transactions has been a major challenge,” the KRA stated. “Our goal is to establish a robust and efficient system that will enable KRA to collect taxes on cryptocurrency transactions effectively.”

Although cryptocurrency transactions in Kenya remain unregulated by authorities such as the Central Bank of Kenya (CBK) and the Capital Markets Authority (CMA), the KRA emphasized that earnings from this sector are legally taxable under Section 3 of Kenya’s Income Tax Act. This section allows for the taxation of income generated from cryptocurrency activities, including trading and other related earnings.

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“Although the sector remains unregulated by reporting authorities like the Central Bank of Kenya and the Capital Markets Authority, earnings from this sector are legally taxable,” the KRA reiterated.

In addition to the new system, there is a legislative push to further regulate the sector. The Capital Markets (Amendment) Bill, 2023, introduced by Mosop MP Abraham Kirwa, seeks to include digital currencies in the definition of securities under the Capital Markets Act. If passed, the bill would allow the KRA to impose capital gains tax on cryptocurrency exchanges and excise duty on related transactions.

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