The Kenya Revenue Authority (KRA) is set to introduce a new real-time tax system that will integrate with cryptocurrency exchanges allowing the regulator to monitor crypto transactions and collect taxes.
According to local reports, this is part of a strategy to nab tax evaders in the largely secretive market segment which criminals can also exploit to support illicit activity such as thefts, fraud, and money laundering.
“The system shall integrate with cryptocurrency exchanges and marketplaces to track and record cryptocurrency transactions. It shall capture transaction details, including transaction date, time, type and value,” KRA said in a document outlining their tax collection strategies for the financial year 2024/25.
The authority estimated that between 2021 and 2022, the Kenya cryptocurrency market transacted about KES 2.4 trillion ($18.5 billion) representing close to 20 percent of the country’s GDP.
“With this potential, it has become increasingly important for the KRA to develop a system to track and collect taxes on cryptocurrency transactions,” KRA said, noting that it is procuring a new digital tax system to cover crypto trading.
“Though the sector remains unregulated by reporting authorities i.e. CBK (Central Bank of Kenya) and CMA (Capital Markets Authority), the earnings from the sector are legally taxable as per Section 3 of the Income Tax Act. The lack of a robust system to collect taxes on cryptocurrency transactions has resulted in a significant loss of revenue for the government.
The system shall integrate with cryptocurrency exchanges and marketplaces to track and record cryptocurrency transactions. It shall capture transaction details, including transaction date, time, type, and value” the KRA said in a brief of its targeted new tax system.
KRA said the planned system will calculate taxes owed based on cryptocurrency transactions, assess duties owed based on Kenya’s tax laws and regulations and generate tax statements and notices to taxpayers.
“The goal is to have a robust and efficient system that will enable the KRA to collect taxes on cryptocurrency transactions effectively and efficiently” KRA added.
The news comes after the organization was tasked by Finance Minister, John Mbadi, to embrace new technologies like blockchain to facilitate trade and enhance domestic resource mobilization.
TAXATION | Blockchain Can Simplify Tax Compliance, Says #Kenya Finance Minister
The Minister highlighted how innovations like digital #taxation platforms, #blockchain, and electronic invoicing systems can simplify compliance, improve trade transparency, and integrate the… pic.twitter.com/i0rjlKAwgd
— BitKE (@BitcoinKE) October 8, 2024
Strapped for cash, the government also wants to designate all digital payment systems as virtual electronic tax receipts services. This means systems such as mobile money service M-PESA and bank pay bills, till numbers, and other merchant payment systems will be deemed as ETR systems.
TAXATION | #Kenya to Designate All Digital Payment TouchPoints as Virtual Tax Receipts Increasing Tax Payers by Over 10x
Combined, all Kenyan telcos and the banks who are doing mobile money have over two million of them, 10x the ETRs at KRA.https://t.co/4I0FvIcaCO @KRACare pic.twitter.com/JNMnT4gtai
— BitKE (@BitcoinKE) October 11, 2024
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